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Last Updated: Friday, 1 April, 2005, 06:38 GMT 07:38 UK
India launches VAT amid protests
Closed wholesale market in Delhi
Markets across India have been shut down
A new value added tax has been introduced in India in what is seen as the most ambitious tax reform in more than 50 years.

The tax replaces a host of existing add-on tariffs and is aimed at simplifying India's bewildering tax system while generating more revenue.

But traders who oppose the tax have forced markets across India to shut for a third straight day.

They say the move increases paperwork while forcing them to pay more.

VAT is taking effect in 21 of 28 Indian states which have decided to implement it.

Under the proposed system, two rates of 4% and 12.5% will be imposed on most of the products on which various kinds of sales taxes are levied at present.

We are continuing our strike against VAT, which will keep prices high and affect the poor
Praveen Khandelwal,
Confederation of All India Traders

Certain commodities like petroleum products, alcohol and lottery tickets have been exempted.

Officials say they are optimistic that opposition to the tax will die away.

"We have 21 states on board and I am sure the others will join within a month and a half," Ramesh Chandra, the official overseeing VAT implementation, told Reuters news agency.

Price rise fear

But the tax, which has been delayed five times in the past 10 years, is being opposed by traders who argue that the tax department is not prepared to implement it, and that they will be forced to pay higher taxes.

"We are continuing our strike against VAT, which will keep prices high and affect the poor," Praveen Khandelwal of the Confederation of All India Traders is quoted as saying by the Press Trust of India.

But independent analysts say the introduction of VAT will make tax evasion much more difficult.

They say it will help integrate India's economy with the rest of the world.

How VAT will affect India's economy

India traders protest at VAT plan
30 Mar 05 |  South Asia
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17 Jan 05 |  Business
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09 Feb 04 |  Business
Indian economy 'better than ever'
03 Feb 04 |  Business
India's economy: Can the boom last?
07 Jan 04 |  South Asia

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