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Mobile Phones To Be More Expensive In Maharashtra!
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The Maharashtra government triples VAT on mobile phones, which, according to the experts, is very distressing for the mobile industry and would also lead to a resurgence of the grey market.
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Thursday, July 02, 2009:
The Maharashtra government has hiked the value-added tax (VAT) on mobile cellular handsets from 4 per cent to 12.5 per cent, which will enable mobile handsets price to become more expensive across Maharashtra. This tax increment would pust up the cost of a Rs 3,000 mobile handset by Rs 250, as per the analysts.
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Commenting on this move, Vipul Sabharwal, director sales, Nokia India, said, "The move by the Maharashtra government to hike the VAT on mobile cellular handsets from 4 per cent to 12.5 per cent, is not just very distressing for the industry, but is also a very shortsighted move. The mobile industry is a fast growing segment, which contributes significantly to the GDP of the nation as well. This is a self defeating move, bound to reverse the growth of the industry, thereby impacting the socio-economic development of the state as well."
According to industry estimates, the sales of mobile handsets in the state of Maharashtra at present stands at a million units per month today, which translates into a turnover of Rs 300 crore per month, at an average selling price of $60 (Rs 50=$1). With the proposed hike of 8.5 per cent the Govt. Of Maharashtra expects its VAT revenues to increase to Rs 36 crore per month from the current monthly revenues of Rs 12 crore per month.
However, the telecom industry believes that an 8.5 per cent hike, or a total VAT of 12.5 per cent will lead to a massive drop in legal sales, with sales falling to Rs 30 crore per month from the current Rs 300 crore. This means that the VAT revenue collections will, in turn, fall to around Rs 4 crore a month, thus leading to a loss of Rs 8-10 crore per month or approximately Rs 100 crore annually to the State Government exchequer.
Additionally, revenue from Octroi, which currently stands at Rs 9 crore, is expected to be negligent on a monthly sales turnover of Rs 30 crore.
This is because such a regressive move will lead to a resurgence of the grey market, with handsets coming in from both neighboring states as well as from international markets such as Singapore and Dubai, explains Vipul.
"This will in turn affect business on the organised trade as well, impacting employment and encouraging unethical practices – all in all, a completely unfortunate and lose-lose situation for all stakeholders involved starting with consumers," concluded Vipul.
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