The Department of Telecommunications (DoT) has asked the finance ministry to exempt mobile phones costing up to Rs 5,000 from the hike in excise duty that was announced in the Union Budget 2013-14.
In a letter to the finance ministry,the DoT had said that the exemption should be increased for mobiles costing Rs 5,000.
The government had announced an increase in excise duty on mobile phones costing above Rs 2,000 from 1 per cent to 6 per cent in the current Budget.
A senior telecom ministry official said that the impact of excise duty may hit the sale of handsets in the country. The exemption on increase in excise duty for mobiles up to Rs 2,000 does impact a lot of buyers and the exemption limit needs to be increased.
Increasing the exemption limit on mobiles costing up to Rs 5,000 from Rs 2,000,announced in the Budget,would annually free 20 million more mobiles from being taxed.
Sale of mobiles up to Rs 2,000 constitute around 65 per cent of the total annual sale in the country and with mobiles up to Rs 5,000 added,the share of mobiles sold increases to 75 per cent of the annual mobile handset sales of 200 million. Mobiles up to Rs 5,000 constitute around 50 per cent of the total revenues earned.
The Indian Cellular Association (ICA),which has opposed the move of imposing excise duty on mobile phones,feel that increasing the limit will only provide partial relief to the industry.
The National Policy on Electronics and IT 2020 had declared mobile handsets as goods of special importance and proposed 10 year stability on taxes. Introducing any tax on mobile phones will go against that and would also add to the existing grey market in the country, said Pankaj Mohindroo,national president of ICA.