India Misses VAT Deadline Again Amid Strikes And Protests

by Mary Swire, Tax-News.com, Hong Kong

03 April 2003

The Indian government's plans to introduce a nationwide VAT system were once again derailed this week as disgruntled traders and shop owners staged a series of strikes and protests up and down the country.

The new tax was scheduled to come into operation on April 1 but opposition by many states, such as Delhi and Rajasthan - who have refused to implement it, partly in response to the mass protests - has effectively scuppered the law in time for the new financial year.

It is the third time the government has missed the deadline to implement the unpopular tax, and it now seems possible it will be deferred for another year.

One group asking for a one year deferral is the Confederation of All-India Traders. They say that the imposition of VAT on top of existing sales tax rules will amount to an administrative nightmare, and argue that most state governments are not properly equipped in terms of infrastructure to oversee the new tax. Until the existing ST (sales tax) laws are repealed, VAT should not be introduced, according to Praveen Khandelwal, general secretary of the Confederation.

The central government is due to make a decision on the implementation of the tax on April 8, while some state legislatures still await presidential approval of the new tax. So far, only five states have the appropriate legal mandate to proceed with implementation.

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