Maharashtra Government's move to impose 12.5 per cent value added tax (VAT) on mobile handsets in the state has not gone well with the mobile industry, as the handset sales have suffered a major jolt. The state, with average sales of a million handsets every month, is the largest mobile in the country in terms of revenue and units.

Mobile headset sales declined by three-fourth in the first 10 days of revised VAT structure in the state, as per Indian mobile industry body, the Indian Cellular Association
(ICA). Sales of handsets in the rural areas too were adversely impacted, declining as much as 85 per cent in the reporting period.

Pankaj Mohindroo, the president of Indian Cellular Association, said: "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."

However, Maharashtra, having 47 million mobile uses, reported an increase in its revenue to Rs 70 crore between June 1 and June 10. Meanwhile, mobile manufactures and ICA representatives urged the state government to roll back VAT hike.