The competitive imbalance is created because of the different provincial and federal taxes. HST jurisdictions tend to be closer to 15%. For non-HST or jurisdictions with no sales tax, it would be 5%.
To be clear, if this law is passed as is, everywhere GST is charged, people would be paying the GST. What is problematic and what the GST should never do is create an incentive for a business to move from one province to another. Provincial governments are free to incentivize businesses to come to their provinces as much as they would like, but federal GST should be neutral on this. This law is not neutral.