India should keep its fingers crossed when GST rolls in. Here’s why!

India is all geared up for the launch of the Goods and Services Tax (GST), its biggest tax reform since independence.

The regime will unify the $2 trillion economy into a single market, thus being the tax revamp that it is. However, whether India stands the test of time remains to be seen.

First, the country's size is enormous, and not to forget, the diversity that it offers is not helping either. After all, it isn’t easy for a country of 1.3 billion people, 29 states, and 22 official languages to overhaul their tax structures.

"Certainly there will be an adjustment period, there is no doubt about that," Arvind Panagariya, vice-chairman of Niti Aayog told ET. the length of this period, as well as the level of struggle involved can’t be predicted beforehand.

History stands evident, since about 160 countries that have had GST, have found the adjustment period to be rough.

The pre-effect of GST can be seen in some companies, particularly in the consumer goods sector, offering big discounts to clear their inventories so that they don’t have to deal with two different prices for the same product pre and post GST.

Not only this, some companies could be postponing production in order to be able to claim a credit against their costs for the first time under GST.

This would, no doubt, lead to issues in transportation as after GST, everyone would be running to restock.

"Overall there will be some nagging problems to begin with on the implication and compliance sides," said Madan Sabnavis, chief economist at Credit Analysis & Research Ltd. in Mumbai. "But this will be temporary for the first six to nine months."