Brief: Nokia India: After the tax rate increased from 4% to 12.5% on mobiles, sales dropped 70%

Remember the protests I told you about in India? Well … it didn’t work. On July 1st, the VAT (value added sales tax) on mobile phones in India went from 4% to 12.5%, which is a 312.5% increase. How do you think that has impacted sales? “Industry-wide handset sales have fallen over 70% as of 23 July, compared to June. Every player has been affected and we, too, have felt the pain.” – Nokia India Head of Marketing, Vineet Taneja. He added “It is a regressive step and will give rise to a situation where the market will see (more) grey imports. And since these phones are untraceable, it is a compromise to the national security.” And “VAT collection, too, has gone down by 25%. They (government) think sales will remain constant (and) tax collections would be three times higher. This is reversing the success of the cellphone industry, the growth of which had been earlier stimulated by good policies.”

Update: This 12.5% VAT is only in the Indian state of Maharashtra, not the whole country. Some Maharashtra facts: 2nd largest state with 91 million people, capital and largest city is Mumbai.