India Misses VAT Deadline Yet Again

by Lorys Charalambous, Tax-News.com, Cyprus

03 June 2003

The imposition of Value Added Tax (VAT) in India has been postponed yet again, as the country missed the June 1 deadline set some weeks ago. Consequently, a committee of state finance ministers and representatives from political parties are now attempting to formulate a new "roadmap" for implementation of the tax.

The VAT issue has been a hugely contentious one for India, which has postponed the phasing-in of the indirect tax more than three times in the last two years. The government's plan to press ahead with the tax has sparked bitter protest from traders and shopkeepers up and down the country, with many staging a series of strikes in protest.

The main stumbling block for the central government however, has been the apparent inertia of the state legislatures. 11 states have drafted the legislation necessary to introduce the new tax, but it has been found that some of the bills drawn up by the state governments contained "considerable" differences from the recommendations made by the committee responsible for overseeing the new tax.

A new deadline for the introduction of the tax has yet to be put in place, although Finance Minister Jaswant Singh has let it be known that VAT cannot be introduced piecemeal on a state by state basis, as anything other than a complete consensus is likely to cause economic chaos.

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