Value Added Taxation in the States: The Challenges Ahead

The need for coordinated development of domestic trade taxes in Indian federal polity has shifted the focus to reforms in the States' sales tax systems. The detailed analysis has led to a concensus on the need to transform the prevailing sales taxes into a destination based consumption type value added tax. The attempts to reform the sales taxes, however, have not been always in the right direction and, in addition, have met with resistance from traders. Based on the experience gained so far, the paper attempts to set out the strategy and stages of reform towards evolving the value added tax which is less distortionary and more acceptable to the traders.