With service sector accounting for nearly 50 per cent of its GDP, India would do well to adopt, as early as possible, value added tax system, which is not only a better way to tax the services sector but it also increases tax compliance, a top World Bank official said in Bangalore on Thursday.

"Taxation of services is an important issue. VAT is a method to tax services and it can lead to greater tax buoyancy besides ensuring better tax compliance," World Bank vice president and chief economist Nicholas Stern told reporters.

Implementation of the VAT regime, strongly favoured by the Kelkar committee on tax reforms, has been hanging fire since April this year.

With Finance Minister Jaswant Singh ruling out its implementation without all states making full preparation for its introduction, and the trading community vehemently opposing it, VAT is unlikely to be implemented before the Assembly elections in some states later this year.

Stern stressed that any tax reform has to be within the framework of constitution and VAT is no exception.

He said other countries too faced difficulties in implementing VAT, but it was found to improve tax compliance, thus improving revenue mobilisation.

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What do you think about the story? Read what others have to say: Number of User Comments: 4 Sub: gr8 analysis great message my vinod harward Posted by ram economist Sub: WB, IMF, etc. are the stooges of the big powers. Jaswant, you dont necessarily have to permit yourself to be dictated in every matter by these world bodies representing the vested interests of the West. ... Posted by chanakya Sub: VAT-very abysmal torture-->redefine system VAT-VERY ABYSMAL TORTURE thats what i can say..here in normal life we r very much affected in VAT implementation.for eg.take textiles industry..vat has already made ... Posted by vinod harvard Sub: Reg.Vat I request the World Bank official to urge the USA to implement VAT. Posted by PV JOSE, JAIPUR