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A VAT in India: Problems and Options

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  • Burgess, Robin
  • Stern, Nicholas

Abstract

The Indian tax system has yielded substantial revenue increases in the last two decades but these have been outstripped by expenditure growth. A weak budgetary position, the • desire for trade and domestic liberalisation, the complexity and anomalies in the existing system and the weakness of direct taxation together point to the need for a major reform in indirect taxation. An obvious candidate is a VAT. While the benefits of a VAT in terms of economic efficiency are well known, its introduction in a federal context, such as India, poses problems. We review some conceptual issues and international experience with VAT. Careful consideration of questions relating to the choice of bases and rates, revenue sharing and tax administration will be required. A number of possible versions of a VAT in a federal context are identified. Each has its advantages and disadvantages and further research will investigate particular issues that arise.

Suggested Citation

  • Burgess, Robin & Stern, Nicholas, 1992. "A VAT in India: Problems and Options," Institute for Policy Reform Working Paper Series 294685, Institute for Policy Reform.
    • Handle: RePEc:ags:iprwps:294685
    DOI: 10.22004/ag.econ.294685
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    References listed on IDEAS

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    1. Shah, Anwar, 1990. "The new fiscal federalism in Brazil," Policy Research Working Paper Series 557, The World Bank.
    2. Bomfim, Antulio N. & Shah, Anwar, 1991. "Macroeconomic management and the division of powers in Brazil : perspectives for the nineties," Policy Research Working Paper Series 567, The World Bank.
    3. Nicholas Stern, 1990. "Uniformity Versus Selectivity In Indirect Taxation," Economics and Politics, Wiley Blackwell, vol. 2(1), pages 83-108, March.
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    1. Burgess, Robin & Stern, Nicholas, 1992. "Tax Reform in India," Institute for Policy Reform Archive 294811, Institute for Policy Reform.
    2. Burgess, Robin & Stern, Nicholas, 1992. "Tax Reform in India," Institute for Policy Reform Working Paper Series 294811, Institute for Policy Reform.

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