Increased VAT might make mobile phones costlier in Maharashtra

The government of Maharashtra has increased the Value Added Tax (VAT) on mobile phones from 4% to 12.5%. What it means is you have to pay more for a mobile phone in Maharashtra compared to your fellow buyers in other states in the country.

Major mobile companies like Nokia, Motorola, Samsung and others have raised concerns on this as the increase in VAT might distract customers from buying a phone, or they might prefer to use their old phones for a longer period of time.

It could also encourage the grey market. According to industry estimates, around a million handsets are sold each month in Maharashtra which means a sales turnover of Rs 300 crore at an average selling price of 3,000 per unit.

With the proposed hike of 8.5%, the state government expects its monthly VAT revenues to increase to Rs 36 crore from the current level of Rs 12 crore. Many mobile manufacturers as well as retailers in the state have started protesting against the decision.