India Faces Challenges in Collecting Tax and Customs Revenue while Speeding the Flow of Trade

In an effort to incentivize states within India to reduce trade barriers by eliminating interstate border checkpoints, the national government has rolled out a nationwide goods and services tax (GST) intended to offset the lost customs revenue currently generated at the checkpoints.  However, as part of a complicated struggle, opposing political groups are fighting the implementation of the GST to protect their own economic interests.  Meanwhile, the existence of the checkpoints continues to place a great deal of burden on cross-country shippers and hinders the movement of goods across the country.

Over 650 interstate border checkpoints exist across the country, which is estimated to add 25% longer travel time for the movement of transport trucks and inflates logistics costs to 13% of India’s GDP.  Just as there is political contentiousness surrounding international free trade deals across the world, this struggle within India does not appear to be nearing resolution.

Regardless of the outcome of this conflict, where border checkpoints do continue to exist, it should be recognized that there are Coordinated Border Management initiatives that can be taken to alleviate shipping delays and their detrimental economic impact. These include the expanded use of advance information, revenue risk management strategies, the automation of processes where possible, and a public-private sector dialogue to advance partnership opportunities.

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