GST Impact - How Will GST Affect Telecom Sector?
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The biggest reform happening to hit Indian taxation is GST. Goods and services tax also known as GST will be the only indirect tax levied on goods and services at the national level. Though it is believed to streamline the process of taxation, it has got political opposition even during UPA 2 regime. What happens next to the telecom sector when GST is implemented? Let’s have an outlook on it.
As per Telecom analysts and experts, GST is expected to ease business doing across the country. It will simplify the tax structure administered across states and make it under federal framework. Definitely, GST will turn India into one common market.
GST Affect - An Immediate Loss:
As per some industry specialists, telecom tower companies will miss more than INR 2,000 crore annual savings as petro-products are kept out of GST regime. It’s definitely a setback as telecom sector is the second biggest buyer of diesel after the Indian railways. Indeed, it’s a big loss!
The current service tax rate is 15% and as per GST it could be 18% and thus subscribers will have to shell out the difference. It could be in the form of higher call charges and higher data charges. If it is a benefit, then the telecom operators will hold it. As this is a loss, so companies will definitely pass this loss to their subscribers. Just kidding! :slight_smile:
On the positive side, GST will give a big boost to handset makers. Now, the companies need not shell out on state specific taxes and warehouses. With uniform tax, the companies can now invest only on business activities leaving logistics issues. With 18%, one can expect a price increase across all the mobile phone handsets.
For e-commerce companies, GST will ease the business as the new tax will make tax collection at source and facilitating deeper penetration of their services. However, it could lead to multiple taxation points instead of single invoice.
With Pan India service, one can expect highly regulated services from telecom operators. Initially, GST may bring negative consequences financially. However, in the long term, policy making would be easier leading to better business.