Telecom Bills May Go Up With 18% Goods and Service Tax Slab Rate

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Re: GST Impact - How Will GST Affect Telecom Sector?

As per the recent announcement by the Finance Ministry, telecom bills may go up with 18% Goods and Service Tax slab rate. Though the government is yet to announce segment wise rates, it has unveiled a four tier GST structure with rates of 5%, 12%, 18% and 28%.

Increase in Monthly Bills:

The Economic Times, the leading daily newspaper on Indian economy and matters related to finance, reported that tax on telecom services could be 18% as compared to the current 15% rate. As a result, the effective 3% rise could be noticed in monthly telecom bills. For example, a subscriber currently paying a monthly mobile bill of ₹1,000 will have to shell out ₹30 more.

May Hit Digital India Campaign:

On a larger scale, this higher GST rate could give a serious blow to Government’s Digital India ambitions. As it directly hurts the common man and growth of the infrastructure sector would be at a lower rate. Mr Rajan Mathews, Director-General, Cellular Operators Association of India, said, “Since telecom is an essential service under Essential Services Maintenance Act, 1968, it was imperative that the one country one tax GST rate should have been aligned with the merit rate of tax applicable for essential products and services, which is way below 15%”.

“It will have an inflationary effect on the overall cost of provisioning telecom services and increase costs for subscribers,” added Mr Mathews. Moreover, the continuation of Central Exercise duties and State Sales Taxes on petroproducts will have a negative impact on telecom companies. Incidentally, the telecom sector is the second biggest purchaser of diesel after the Indian Railways.

Can it be 12% GST?

With the proposed four-tier Goods and Service Tax GST gets operational April 2017, the telecom industry executives expect that 12% GST slab rate is unlikely as it will mean a cut in revenue for the government. Keeping fingers crossed. Watch this space for more updates.