In order to ensure trouble-free implementation of a radical and somewhat complex tax (reform) measure such as the VAT, it is very important first to create awareness and generate a sense of confidence among different stakeholders.

From the year 2000, at regular intervals, states have announced their intension of switching over to the VAT system and every time such announcements have met with cynicism. That is because on all occasions the states decided to postpone the implementation of VAT at the eleventh hour. This time too there is an uncertainty in the air albeit a little less. Unlike in the past this time around the central government has not insisted that the states abolish the contentious Central Sales Tax (CST), at least for the time being. CST has been a lucrative revenue source for many states, particularly the industrialized ones. It was the tussle between the center and states on the issue of providing compensation to the latter in order to make up for the revenue losses due to abolition of CST that stalled VAT implementation in the year 2003. As the National Democratic Alliance went for early elections, the year 2004 did not see any attempt to implement VAT. In fact, being an election year, the government of the time decided not to go ahead with VAT fearing adverse political consequences. But this year round a new government is in place at the center and is politically well-placed to go ahead with VAT implementation. Most importantly, the present Finance Minister P Chidambaram is determined to beat the VAT deadline and has been actively supporting the states' effort on this. After assuming office he has not only resolved the problem of compensation to the states for possible loss of revenue in the transitional years of implementation of VAT, but also participating with the states in the campaign for implementing VAT.

In order to ensure trouble-free implementation of a radical and somewhat complex tax (reform) measure such as the VAT, it is very important first to create awareness and generate a sense of confidence among different stakeholdersmanufacturers, traders, consumers and government officialsbefore going in for its full-fledged implementation. This is particularly true in a country like India where there is a lot of misinformation about the implications of VAT. Moreover, a lack of understanding of the new system and the taxpayer's obligations results in non-compliance with the tax laws. The focus, therefore, should be on educating the taxpayers and common public on the tax provisions and procedures under the new system, informing them about their tax obligations and clearing their doubts.

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