NTPC–RELIANCE: CONFLICT OVER GAS SUPPLY

The caselet discusses about the apprehensions of different sections of the society regarding implementation of VAT in India. It explains the scenario in India after the implementation of VAT. It also explains how VAT system of taxation is different from the earlier system of taxation in India. It specifically emphasizes on the efficacy of VAT in India.
Issues:

» Apprehensions regarding implementation of VAT in India.
» Can VAT replace central sales tax in India.
» Benefits of VAT to various sections of the society.
Introduction
Value Added Tax (VAT) came into effect in India on April 1, 2005. The first few days of its implementation saw protests from different sections of society. Even after two months of implementation of VAT, traders are worried and confused over whether they have to pay more tax; consumers are afraid that they will have to pay higher prices for commodities; and companies are unsure of whether they stand to gain or lose.

Certain states in India which have implemented VAT and those which are yet to take it up have a common concern – whether there will be an increase in prices of products after implementation of the new tax system. There are thus a lot of misconceptions and misinterpretations regarding VAT…

Questions for Discussion:
Suggest ways to effectively implement the VAT system in India.
Do you think implementation of the VAT system would result in an increase in prices of commodities?