VAT - Overhauling the Indian Indirect Tax System*



Case Code : CLSDM014
Publication date : 2005
Subject : Sales and Distribution
Industry : Business Environment
Length : 04 Pages
Price : Rs. 100

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Key words:

VAT, State Level Tax, Two-Tier, Cascading Effect, Consumer, Traders, Drugs, Consumer Durables, Confederation of Indian Industries (CII)


* This caselet is intended for use only in class discussions.
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The implementation of Value Added Tax (VAT) in India has been postponed several times. However, it was partially implemented on April 1, 2005 amidst strident opposition from traders. The caselet briefly presents the concept of VAT, discusses some issues related to VAT, and its effect on consumers. It also discusses what VAT has in store for traders and brings out reasons for their opposition to it.


Impact of VAT on sales
Need to reform traditional tax regime
Hurdles in implementing new reforms


On January 17, 2004, the finance minister of India, P. Chidambaram, formally released a 'White Paper' on Value Added Tax (VAT), which suggested a uniform state-level tax on over 500 items.

State governments of 21 states decided to implement VAT from April 1, 2005. However, states like Uttar Pradesh, Tamil Nadu, and Rajasthan abstained from implementing it...

Questions for Discussion:

1. VAT is aimed at removing a number of indirect taxes and establishing uniformity. Discuss how implementing VAT will impact various sectors in India. Also, briefly discuss the impact of VAT on consumers.

2. Post budget, traders resorted to strikes, shutting down shops all over the country protesting against the introduction of VAT. Explain how VAT affects traders. Do you agree with the traders who oppose VAT? Justify your answer.