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Mobile handsets to be costlier in Gujarat

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CIOL Bureau
New Update

MUMBAI, INDIA: In a bid to equalize the value added tax (VAT) rates with that of other states, the government of Gujarat has decided to raise the tax on mobile phones and other commodities.

Vajubhai Vala, Gujarat's finance minister, while presenting the state budget, said the mobile phones will cost 10 per cent more as the VAT rate has been increased from 5 per cent to 15 per cent.

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According to Vala, the rise in VAT on mobile phones has been made in order to keep Gujarat's tax rates in consonance with other states like Maharashtra, Karnataka, Andhra Pradesh and Delhi. This move is likely to impact the sale of mobile handsets in Gujarat.

In fact, the Maharashtra state government had hiked VAT on cell phones from 4 per cent to 12.5 per cent during 2009-10. As result, a large number of consumers bought cell phones from neighboring Gujarat and mobile business in Maharashtra was highly affected. It also resulted in the gray market for cell phones thriving in the state as consumers purchased handsets without bills to evade VAT.

Despite the strong protest of mobile handset makers, retail stores and resellers, the state government refused to lower VAT in the state and maintains the rate even today. The situation of Maharashtra is expected to get repeated in Gujarat too in the next fiscal causing concern for cellphone businesses and revenues.

As per industry estimates, Gujarat has mobile handset market of Rs.2000 crore; however, the tax hike will push the demand of handsets in gray market too.

In this regard, many tax experts and industry analysts believe the situation demands the central government and finance ministry to come out with a simple taxation policy where the taxes such as VAT, Octroi and Excise Duty are at the same rate across all states and henceforth businesses doesn't get impacted.

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