This means that handsets will become more expensive across Maharashtra as handset makers say their margins are just 1% to 2%, leaving no room for price cuts.

For the government, the revenue temptations are obvious. The department of telecommunications (DoT), in a first ever forecast of mobile penetration across India for the next 6 years, has projected a billion mobile phones by 2014. This probably reflects the world's largest new growth opportunity over the next 5 years, surpassing China's potential. China is already at nearly 700 million mobile phones as compared to India's 400 million. The fact that India will add more than 600 million new subscribers' - rates as the biggest subscriber additions for any country in the world.

At an average price of $60 or Rs 3,000 per mobile handset, the additional revenue per handset works out to Rs 240 at a 12% VAT rate. At roughly 120 million handset sales a year, this translates to all-India revenues of roughly Rs 3,000 crore or Rs 15,000 crore over the next 5 years, should all states adopt the same VAT rate. For Maharashtra alone, this translates to higher value-added tax revenues of Rs 36 crore per month from the current Rs 12 crore per month.

Source: Times Of India Maharashtra ups VAT on mobiles, others may follow