Telecom sector shows disappointment at GST rate of 18%

The telecom industry has always hailed GST as an iconic reform, as it will bring in a new era of “one-nation, one-tax” for the country. During several rounds of meetings with the GST Council, the representatives of the industry have brought forward issues relating to smooth operations and expansion of telecom services such as the place of business, centralized settlements, and multiple jurisdiction in one LSA, Place of Supply (PoS), MRP-based valuation and clarity was sought.

The telecom sector pays around 30% of its earnings in taxes and levies, including spectrum usage charge and licence fees. Due to a number of reasons, including hyper competitiveness, the sector has come to a point that can be seen as just short of needing a bail-out. The total debt of the sector is around Rs.4.5 lakh crore, while revenues are around half this. Despite this, tariffs have been going in the opposite direction of inflation.

Taking into consideration the massive impact of GST, the operators have already initiated the registration process involving migration to the GST regime. However, clarity is still awaited on certain aspects of the published rules and the implementation is highly dependent on IT compatibility which requires sufficient time. The telecom industry is committed for the successful rollout of the GST at its scheduled date of 1st July, provided that the submissions made by the industry and clarifications sought, are given in a time-bound manner.

“Telecom industry hails GST as an iconic reform but we are disappointed with the announced rate of 18%. We had submitted to the government that consideration must be given to the present financial condition of the sector and any rate beyond the existing rate of 15% will make the telecom services more expensive for the consumer. It will augment the existing burden of the industry further. This is also likely to slow down the planned rollout of infrastructure across the country and will have an impact on flagship government initiatives like Digital India, Cashless India and others,” said Rajan S. Mathews, Director General, COAI.

“As an essential service, the telecom industry needs some benefits and tax relaxation in order to provide a seamless and hassle-free service. The industry has worked tirelessly and has fulfilled its motto of connecting everyone till the last-mile connectivity,” Mathews added.

COAI is hopeful that GST will ensure a mechanism to bring down ancillary and peripheral costs of streamlining other services and the industry remains committed for a fully empowered and connected India.