On May 1, 1998, the state government promulgated an ordinance amending the Bombay Sales Tax Act and among several other hikes in taxes, the rates on electronic systems, instruments, appliances and apparatus covered under C-II-26 rocketed from four percent to 13 percent, a whopping 325 percent increase.

Firms such as Micro Control and many others in the electronics business have been sorely hit by the recent hike. Sales tax has doubled for computers, computer printers of all types, keyboards, monitors and hard discs, floppy discs, electronic parts and components, electronic accessories of computer and tapes, spools, fax machines, PABX, EPABX,microwave anntenna, wireless communication equipment such as hand-held transreceviers and sound transmitters. The tax rate on software packages is up from one percent to four. Now technology know-how and good too will be taxed at 4 percent.

Badrinath says the step was taken because the state felt the electronics industry was raking in money but says it is wrong to generalise. "Cuts in customs duty have made imports cheaper. In the local market there has been a proliferation of units resulting in increasing pressure on our margins. We were already operating on such thin margins and now it will be difficult to absorb this hike."

Micro Controls has lost out to competitors from Hyderabad who number around 25 unlike Maharashtra where players are a mere handful. Andhra Pradesh is charging taxes at just two percent. Badrinath feels that this is yet another indicator of the state's skewed priorities. "While the Maharashtra government was busy with Michael Jackson, the Naidus of the world were courting BillGates."

The latest efforts for mopping up additional revenue has affected not just the electronics industry. Equally hit is the food processing industry especially the non-vegetarian segment. Semi-processed food made from the flesh of any bird or animal will attract sales tax of 13 percent. Raw sea food including fish, prawns, lobsters, crabs, shrimps and poultry meat sold in a frozen state or sealed container will be taxed at four percent. Shelled eggs in any form, packaged powdered wheat (atta, maida, rava) and chili seeds too will be taxed.

To add insult to injury, the sate government has made rates applicable from the day the ordinance was issued even before the gazette was made available throughout the state. "Even the apex court has ruled that such taxes come into force at a later date. Normally it takes eight-15 days for the notification to reach everyone" says tax consultant Shantilal C Shah. Shah, too, had to personally send for a copy of the gazette from Mumbai.

In this situation, affectedindustry players have few options. They could either relocate to another state or move out of hitech areas such as the aboveand into those where the state government has permitted total or partial tax exemption. Such as Gandhi topis, mangalsutras and pens.