Most of the 12 state governments, which have agreed to adopt the value-added tax (VAT) regime from April 2002, have said that they are not willing to depend only on the taxation of services to make up for the losses arising from the transition. These states feel imposing fresh taxes on services will be a politically-sensitive issue and thus, have renewed their demand for cash compensation by the Centre.
The objection has apparently delayed the firming up of the list of services which a committee of finance secretaries was working on. A senior state government official involved in the VAT exercise said: