All but three Indian states have agreed to implement a value-added tax by April, India's finance minister said yesterday, raising the likelihood that India will be able to launch its most ambitious tax overhaul in more than a decade. After a meeting with state finance ministers, Finance Minister P. Chidambaram said 26 state governments have agreed to implement the tax. The three states that have yet to agree to the proposal will receive "technical assistance" from the government to enact such a tax, he said.
India's federal government has pushed the idea of a value-added tax to reduce tax evasion. States have been reluctant, fearing loss of revenue and the loss of power to determine local tax rates. Traders also have resisted, fearing paperwork and the need to pay tax up front and wait for refunds. Since 2001, the VAT has been delayed at least five times. The latest deadline for the introduction is April, when a uniform 12.5% VAT is set to replace the general sales tax, which varies from state to state, and a host of local levies. "The states may get more revenue than what they are getting now. That's my assumption," Mr. Chidambaram said. |