Though the change has been made across the table from 4 per cent to 5 per cent and from 12.5 per cent to 14.5 per cent, mobiles and its accessories which were in the 4 per cent slab earlier, have been reclassified to erstwhile 12.5 per cent slab and now revised to 14.5 per cent. So in effect, the prices of mobile handsets will go up by around 10 per cent at the retail end.

The reclassification of mobile handsets to attract 14.5 per cent VAT, will hamper the growth in mobile handset consumption within the State, says the Indian Cellular Association. “We are sure this must be by oversight and the Government does not want to send out any negative signal for the existing mobile handset manufacturers and retailers,” says Mr Pankaj Mohindroo, National President of Indian Cellular Association.

The association is a national-level common body of mobile phone and component manufacturers and retailers.

Mr Mohindroo says currently Tamil Nadu at Rs 2,500 crore contributes a little over 8 per cent of the Rs 30,000-crore mobile handset market in the country. Thanks to the revision, mobile phones and accessories which were in the 4 per cent VAT brackets would now attract 14.5 per cent, which means the consumer has to shell out 10 per cent more to buy the handset. “This will only make the grey market thrive in the State,” he said.

Source : Hindu Business Line, India, dated 12/07/2011