Under the plans announced in the Budget, the government has raised the excise duty on handsets priced above Rs 2,000 (US$37) to 6 percent. Mobile phones currently attract an excise duty of 1 percent, regardless of their value.
Around 30 percent of imported and 40 percent of domestically manufactured handsets will be affected by the higher tax rate.
The Indian Cellular Association (ICA) President, Pankaj Mohindroo said the move would encourage grey market, adding that ICA will approach the finance ministry for reversal of the tax change.
Around 20-30 million of the 200 million phones sold last year were smuggled into the country.
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