ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Reform in Central Sales Tax in the Context of VAT

This paper is concerned with the treatment of inter-state transactions in the levy of state VAT. It addresses the conceptual issues of central sales tax (CST) and the need to phase out the tax to ensure a common market, advances interim measure to reduce the CST to operational level and the final reform to zero-rate the CST, examines the revenue implications of CST reduction in the short term and zero-rating in the long term. It also examines the issue of compensating the states for the loss of revenues and finally deals briefly with the management information system needed to monitor inter-state transactions in the absence of CST.

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