3C.1 Tax Rates before and after the VAT Reform, by State and Union Territory

Firms face different VAT rates depending on the goods they sell: 75 percent sell goods on the reduced tax schedule that are taxed at 4.0 percent; 21 percent sell goods on the main tax schedule that are taxed at 12.5 percent; and the remainder are taxed at super-reduced rates of 0 percent–1 percent. In 2014, the VAT rates for the main and reduced schedules increased by 1 percentage point. For simplicity, the chapter does not distinguish among the tax schedules and assumes that all firms pay a flat VAT rate of 12.5 percent.

FIGURE 3C.1 Tax Rates before and after the VAT Reform, by State and Union Territory

Source: Agrawal and Zimmermann 2019. Note: vAT = value added tax.