Journal Press India^®

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An outstanding development in the sphere of State finances since Independence has been the precipitous growth in the relative revenue significance of sales tax levied under entry 54 of List II in the Seventh Schedule of the Constitution. It has grown considerably in depth and coverage, and forms the mainstay of States’ tax revenue. Prior to tax reforms initiated in early 1990s, sales tax was characterised by a multiplicity of tax rates and exemptions, lack of uniformity across States, large number of exemptions and concessions, and differing procedures for tax collection. In mid-1990s, most states had agreed to phase out the incentive-related exemptions and implement floor rates of sales tax. As part of the nation-wide efforts to redesign commodity taxation and the implementation of CENVAT at the level of the Centre, many States have modified their sales tax regimes to launch a state level VAT under the scheme prepared by the Empowered Committee for this purpose. This paper explains and examines various problems associated with sales tax and its switch over to Value Added Tax (VAT) in recent years.

Keywords

Sales tax, Value-added tax, Inter-State sales

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