Value added tax the Indian experience - analysis and recommendations

Abstract

This paper studies the Indian experience with Value added Tax (VAT). Weakness in the existing tax structure is brought forward and global experiences are studied to see the advantages that VAT brings. Evolution of the present day VAT in India from the earlier system of MODVAT and the relevant implementation details are also brought forward. Analysis of industries is undertaken to understand why certain industries are against VAT. We also try and analyze which states will gain and which will lose under VAT and also the political compulsions of certain political parties, which makes them oppose VAT. On the basis of our understanding of the issues involved we try and predict the road ahead for VAT and also give a set of recommendations, which we feel, should be implemented to make VAT more efficient and successful.