India Reverses GPRS Handset Tax Decision

India's Central Board of Excise and Customs (CBEC) has reversed a decision to classify GPRS enabled mobile phones as radio navigational apparatus for taxation purposes. The impact is significant as radio navigational apparatus (better known as satellite phones) are subject to a 34% customs duty whereas conventional mobile phones attract just a 4% customs duty.

Earlier this year, a circular from the Office of the Commissioner Customs had classified HP's iPAQ 6515 GPRS phone as a GPS receiver. The fact that its primary function was a mobile phone was ignored. The decision caused significant concern in the local industry, as GPRS capable handsets could have been subject to a 25% price rise.

However, on April 19, the under-secretary, Customs policy, in CBEC issued a clarification rescinding the January circular. "An apparatus will be classified as a mobile phone rather than an ADP machine or camera or GPS receiver when its principal function is telephony. For transmission of signals, it should use the bandwidth allotted to cellular/mobile networks."

There had also been some confusion as to whether MP3 capable phones would be classed as pure MP3 players - and subject to higher taxes.

"Prices of high-end sets would have gone up by 20-25% if the circular wasn't have been reversed. The grey market sellers would have imported handsets from other countries where Nokia would launch its products. It?s a very forward-looking judgment," Nokia director-multimedia phones Vineet Taneja told The Economic Times."