Mobile phone prices go up in Maharashtra

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Mobile phone prices go up in Maharashtra

Retail sales of mobile phones and other products highly affected by Maharashtra Government's hike in VAT

CMN Correspondent

Friday, July 03, 2009

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MUMBAI, INDIA: Finally, the State Government of Maharashtra has hiked the value added tax (VAT) on mobile handsets, completely overlooked its impact on retail business and the consumers. The government raised the VAT from 4 to 12.5 per cent, which has pushed up handsets prices at all retail stores, company outlets and shops.

Following the move, the industry has reacted sharply and opposed this decision. According to Vipul Sabharwal, Nokia India's director - Sales, the Maharashtra Government's move to hike the VAT on mobile handsets is not just very distressing for the industry, but is also a very short-sighted move.

"The mobile industry is a fast growing segment, which contributes significantly to the nation's GDP. This is a self-defeating move, bound to reverse the industry's growth, thereby impacting the state's socio-economic development," reacts Sabharwal.

In Mumbai alone, the company has about 40 Nokia branded outlets and stores.

The industry fears that hike in the VAT will lead to grey marketing of mobile phones.

Sabharwal says this would affect the organized business and trade along with impacting employment and encouraging unethical practices.

According to Rajiv Agrawal, CEO, Mobile Store, an Essar Group entity, it is not a great thing for the consumers to pay more than their counterparts in other states.

"It will lead to grey marketing, where products are sold at cheaper prices but without proper bills and no services," he says.

"On one side there's high stress in taking mobility to rural areas and increasing mobile penetration, such move can create major setback. The 8.5 per cent hike in addition to the 5 per cent octroi tax adds about 13.5 per cent to the cost of handsets and mobile products. This means that people in the state are paying 13.5 per cent more compared to other states," Agrawal comments.

Following the state government's decision, past few days many retails stores and shops in Mumbai and across the state had remained closed to mark their protest.

According to industry estimates, the mobile handsets sale in Maharashtra at present stands at one million units per month today, which translates into a turnover of Rs. 300 crore per month, at an average selling price of US$60.

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