The finance ministry will set the ball rolling for an early introduction of a nationwide value-added tax with a two-day meeting of state finance ministers starting in New Delhi on Friday.
The meeting, the first of its kind after the United Progressive Alliance government assumed office, may rework a package including compensation for any loss of revenue when states switch over to VAT for which allocation may be provided in the Budget.
It could also lay down the timetable for the phase out of central sales tax, which is linked to the introduction of VAT all over the country.
The meeting of state finance ministers with P Chidambaram follows his discussion with the chairman of Empowered Committee on VAT and West Bengal Finance Minister, Asim Dasgupta, a few days ago.
Though the Common Minimum Programme has expressed commitment for an early introduction of VAT, Chidambaram has made it clear that it would be implemented only after making all arrangements so that the decision becomes "irrevocable".
VAT, whose implementation has been deferred more than five times since 2001, missed the last deadline of April 2003 as very few states were prepared with the legislations while many others did not consider it politically favourable before elections with stiff resistance from traders.