The Indian government has revealed that it plans to phase out Central Sales Tax by 2007 - a move that may persuade reluctant state governments to implement the new system of VAT.
"CST is a barrier and Empowered Committee of State Finance Ministers is working to remove it,” VAT panel secretary Ramesh Chandra stated at a recent seminar.
“We have determined that the rate of CST will come down to 2% from April 1, 2006, before being ultimately phased out from April 2007," he explained.
It is hoped by the central government that the announcement will sway the remaining handful of states that have refused to implement VAT, which was implemented across the majority of the nation on April 1.
These include the BJP-ruled states Rajasthan, Gujarat, Madhya Pradesh, Chattisgarh and Jharkhand.
Chandra added that with the phasing out of CST, the government would work towards a system of integrated Goods and Service Tax.
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