Rajasthan's decision not to implement value added tax (VAT) has resulted in a lower growth in sales tax collection in comparison to states that have opted for it since April 1.
During the first three months of the current fiscal, the state has been able to garner sales tax collection of around Rs.12.9 billion ($296 million), 20 percent more than the corresponding period last year, sources in the finance department said.
However, the growth is low in comparison to VAT ruled states where the average growth is estimated between 28-30 percent.
"Had the state implemented VAT, the collection would have been Rs.2.5 billion more," said Subhash Chaudhary, an economic expert.
The state government has always maintained that VAT cannot be implemented along with the central sales tax (CST).
"The centre is adamant on its stand to eliminate CST, so implementing VAT would be a difficult option," Rajasthan's Minister for State for Finance Virendra Meena said.
There is another problem for the state. If it fails to impose VAT then it would lose the central government's discretionary assistance.
Moreover, if the state does not implement VAT, the growth in sales tax collection would be much less compared to other states, economists feel.