According to the Indian Cellular Association (ICA), sales of mobile phones through retail have decreased by more than 75 per cent during the first ten days of July as compared to last month. The state of Maharashtra had recently hiked value added tax from 4 to 12.5 per cent.
For the first ten days this month, the revenue figure stood at Rs70 crore, a drop of 25 per cent, as compared to Rs16.8 crore for the same period last month. The revenue from octroi dropped by 75 per cent during the first ten days this month.
Retailers have expressed their dissatisfaction at the hike in VAT as it hits their margins. (See: Retailers growl as Maharashtra triples VAT on mobile phones)
Pankaj Mohindroo, national president, Indian Cellular Association, said, ''The ramification of this increased tax burden has been manifold for all stakeholders of the mobile ecosystem. We have been articulating this ever since the proposal of the 8.5 per cent hike was tabled. The dismal sales records of the first 10 days only reiterate the fact that such an arbitrary hike can only result in a complete lose-lose situation for all stakeholders.''
''More than 70 per cent of the phones sold in Maharashtra are for less than Rs3,000. On an average price of Rs3,000, the impact of a hike of Rs250 would be significant. In fact this is significantly more than what most consumers in the category - both in rural and urban markets - pay per month for their mobile usage. With rural tele-density at a meagre 12.5 per cent, there is a long way up ahead for rural mobile telephony uptake, making handsets more expensive, will only serve to decelerate rural penetration.''
In rural areas, the decline was much steeper at 85 per cent. Maharashtra is the largest market for mobile phones by revenue and units sold. The monthly sales in the state are around Rs300 crore.