Cellphones are set to cost more in Andhra Pradesh soon. Exploring all avenues to mobilise additional revenue, the cash-strapped AP government has decided to increase VAT on cell phones. Only a day ago,  the AP government hiked petrol and diesel prices by Rs 4 per litre. Officials discussed that some states have been earning more revenue by collecting as much as 14.5 per cent through VAT on cellphones. But, the AP government has been charging only  4 to 5 per cent.

AP finance department has directed the commercial taxes department to send the proposals in this regard. Finance department officials said the government may increase VAT to about 10 per cent, but only on phones costing more than Rs10,000. A finance official said that the government has no idea about how much additional revenue it will generate.

The idea of increasing VAT came from a grievance letter, said the official. Pointing out the increasing tax burden on poor people, the writer of the letter had said rich people change expensive handsets only as a fashion trend. But, the government  collects the same tax from the rich as it does from the poor on cellphones. The letter also suggested VAT hike on high end handsets. Accordingly, the government decided to increase VAT on cellphones which cost more than 10,000 as poor and middle class people generally buy cell phones under Rs10,000, said the official.