Tax hike would help grey market: mobile phone body

September 24th, 2008 - 8:49 pm ICT by IANS  

Lucknow, Sep 24 (IANS) The increase in Value Added Tax (VAT) in Uttar Pradesh will lead to a flourishing grey market and the government will suffer substantial revenue losses, an official of the Indian Cellular Association (ICA) said here Wednesday.”At present, the mobile industry is giving a revenue of Rs.100 crore (Rs.1 billion) per year to the government but with the increase in VAT from 4 to 12.5 percent this will drop by 80 percent,” said Pankaj Mohindroo, ICA national president here.

On Sep 20, the state government, in an attempt to generate an additional revenue of Rs.54 billion for implementing the sixth pay commission recommendations, increased VAT from 4 percent to 12.5 percent on 54 items and also again implemented entry tax on several items.

“With the increase in tax, the prices of mobile will become the highest in the state forcing the customers to head towards grey market.

“Besides, this will also be a threat to consumer protection and those employed in this sector,” he said.

According to industry statistics, the mobile market in the state grew by 300 percent last year, the highest growth in any market of the country.

“However, this will drop down drastically. Our representatives met several senior officials concerned and apprised them of the threat we face in Uttar Pradesh due to the government’s decision,” said Mohindroo.

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