The Maharashtra government has imposed 8.5% VAT (value-added tax) on mobiles in the state, making handset dearer as compared to other states of the country from Wednesday. Government's monthly VAT revenue may increase to Rs 36 crore from Rs 12 crore following current decision.

The retailers including the Nokia outlets and the Mobile Store (TMS) termed the decision unjustified and downed their shutters for three hours against the move.

Meanwhile, Indian Cellular Association (ICA), a body for handset players, has urged Maharashtra Chief Minister, Ashok Chavan and other senior officials to review the decision as it would prove detrimental both for retailers and public. The body requested to restore VAT at 4 per cent in the state, having 20,000 retailers and over 450 distributors.

TMS CEO Rajiv Agarwal said, "This increase is not in the interest of consumers. They will be paying more than their counterparts in other states." He said that the move will drop legal sale of handsets, encouraging people to buy mobiles from other states or from gray market.

Nokia India sales Director, Vipul Sabharwal said, "Such a regressive move will lead to a resurgence of the grey market, with handsets coming in from neighboring states as well as from international markets such as Singapore and Dubai."