Over 75 Percent of Mobiles Sold Without VAT in India

March 14, 2011 Taxation in India

push the buttonIndian tax authorities have conducted raids on mobile phone sellers across New Delhi, discovering evidence of significant levels of tax evasion.

On March 13th the Central Board of Direct Taxes (CBDT) released a statement saying that a series of raids have been conducted on several mobile phone retailers around New Delhi who were selling phones which were not properly registered and are considered to be a potential security threat.

According to the CBDT, retailers have been importing mobile phones which do not have the legally required International Mobile Equipment Identity (IMEI). The devices were predominantly imported from China. No records are made of the phones as they enter the country, and they are sold to consumers with no Value Added Tax (VAT) charge.

The CBDT raided 59 separate retailers across New Delhi, and found evidence of INR 2.3 billion (approx. USD 50.84 million) of unpaid VAT. Tax authorities have already closed the stores of some retailers who were found to be avoiding VAT levies or selling illegal handsets. According to the Indian Cellular Association (ICA) approximately 30 percent of the handset sold in New Delhi are imported from China with no EMEI, and sold with no VAT charge. High-end phones are even more likely to be sold without a VAT levy, with nearly 75 percent of phones costing above INR 10 000 (approx. USD 220) are sold without paying taxes. Customs data shows that nearly 7.3 million phones were imported into India in 2009, through the New Delhi Airport alone, and logistic difficulties mean that it is impossible to verify the EMEI number of each device.

Photo by Daniel*1977