VAT, in place in 130 countries, replaces a complex web of state sales taxes and forms the centrepiece of the government's tax reforms to simplify the system and raise revenues for the cash-strapped regions.

Shopkeepers across India were expected to pull down their shutters for a third straight day in protest at the levy, which they worry is complex, poorly prepared and set to burden them with higher payments.

But a senior government official said the new measure had been launched in all but eight states, five of which are ruled by the main opposition Bharatiya Janata Party (BJP) and are refusing to join in.

"VAT has been launched. We have 21 states on board and I am sure the others will join within a month-and-a-half," Ramesh Chandra, secretary of the federal panel overseeing VAT implementation, told Reuters.

"They (the hold-out states) have been enquiring about the new tax with us in the past few days. It shows they are interested."

VAT has been delayed five times in nearly 10 years and the run-up to its implementation has seen the government take on the traders, who hit the streets on Wednesday to start a three-day protest to try to force the Congress party-led coalition to abort the launch.

However, analysts expect the strike by mainly small-to-medium-sized wholesalers, to fade in coming days as big business is backing the new tax.

Industry lobby groups are critical of the BJP-led states' decision and say the country should get the tax moving and iron out any wrinkles after the launch.