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Loses Rs. 2,500 crore revenue due to high VAT rate: ICA

Mobile handset makers’ body Indian Cellular Association (ICA) has appealed to the Maharashtra government to reduce VAT from 12.5 per cent to 5 per cent on mobile phones.

According to ICA estimates, of the total Rs. 10,000 crore mobile phone market in Maharashtra, the state is losing revenue on Rs. 2500 crore e-Commerce mobile phone market due to high VAT percentage.

In a letter written to the Finance Minister of Maharashtra, Sudhir Mungantiwar, ICA National President Pankaj Mohindroo has appealed to reduce value-added tax (VAT) on mobile phones from present 12.5 per cent to 5 per cent floor level in Maharashtra to help traditional brick-and mortar retailers be competitive on pricing against their online rivals that offer steep discounts.

“The E-Commerce website can bill from any of the 25 lower tax locations in the country which follows the IT floor rate of 5 per cent. Thus Maharashtra gets zero revenue on the e-Commerce transaction due to high VAT percentage (12.5 per cent).

“More than 25 per cent of the mobile phone market in Maharashtra (from mid to high end phones) is now occupied by e-retailers. High VAT states lose revenue, employment and business to e-Commerce,” Mohindroo said.

Many traditional mobile phone retailers, distributors in Maharashtra region are on the verge of closure, unable to compete with online retailers, thanks to the significant VAT differential, he said.

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