State dealers down shutters in protest

Dealers across Karnataka are downing their shutters and taking up various
steps to protest against what they believe is a 'shattering blow' to IT
channels. This step is being taken to express their deep dis-approval against
the Karnataka government's proposed sales tax hike on computer hardware and
software from five percent to 12 percent. The strike would also be observed at
the district level. Distis including Tech Pac, Ingram Micro, Rashi Peripherals
and others have also assured their solidarity with the dealers and would be
observing the strike.

Bangalore based dealer organization-Association for Information Technology
(AIT), led by C Dhananjay will also present a memorandum to Chief Minister
Dharam Singh. Dealers are also trying to mobi-lize support from other indu-stry
bodies such as MAIT, CII, NASSCOM and major software industry players. Press
cam-paign and protest march are also on the anvil.

"The hike is too steep and would force consumers to go to the gray
market or to other states," said Dhananjay. At a meeting organized by AIT
on July 20, 2004, dealers said that the impact of the hike would be felt across
various groups including home consumers, students, small and medium businesses,
e-governance proje-cts, multi national companies as well as dealers.

With the addition of 10 percent service tax, it is assu-med that PC prices
could go up by more than 20 percent.

AIT secretary R Sridhar was of the opinion that the hike could discourage
MNCs from choosing Karnataka as their IT destination. "When the sales tax
is only four percent in neighboring states like Andhra Pradesh and Tamil Nadu,
they would choose to set up shop over there," he said.

The tax jump would also force companies to source their hardware and other
requirements from nearby states. However, this too could get stymied if the
state government decides to levy a stiff entry tax on these goods.

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