Goods and Services Tax (GST) and Its Impact on Cross-Border Trade and Global Value Chain Integration: An Empirical Study

The evolving global economy requires indirect tax systems that can promote the smooth movement of goods and services while preserving the fiscal autonomy of governments. The introduction of the Goods and Services Tax (GST) in developing economies, particularly India’s adoption of a destination-based consumption tax, represents a major transformation in fiscal policy. This paper examines the impact of GST on cross-border trade, export competitiveness, logistics efficiency, and participation in Global Value Chains (GVCs). The study focuses on key GST mechanisms, including zero-rating of exports, Input Tax Credit (ITC), Integrated Goods and Services Tax (IGST) on imports, and digital compliance measures such as e-way bills and e-invoicing. These mechanisms have the potential to reduce tax cascading, improve transparency, lower transaction costs, and strengthen the responsiveness of trade to changes in market conditions. At the same time, the paper identifies several challenges that may restrict the benefits of GST, including liquidity constraints arising from duty-free import arrangements, delays in processing tax refunds, and regulatory tensions between domestic tax policies and international trade commitments under multilateral frameworks such as the World Trade Organization (WTO). The paper argues that the effectiveness of GST in supporting international trade depends not only on the design of the tax system but also on the efficiency of its implementation and digital infrastructure. It concludes by proposing policy measures aimed at simplifying cross-border tax compliance, improving the speed and predictability of refunds, promoting digital interoperability, and creating a more trade-friendly tax environment. Such reforms can help strengthen domestic economic resilience while enabling greater integration of developing economies into Global Value Chains.