GST Upsets Telecom Industry: Phones & Phone Bills to Cost More

[Mrinal Chauhan]

Starting July 1, you’ll have to pay more for your phones and phone bills. Under the new Goods Service Tax (GST), telecom and financial services will attract 18% tax instead of the existing 15% tax. This is a big disappointment when the telecom industry balance sheet is already bleeding in the hyper-competitiveness.

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

Telecom Sector Disappointed:

As per the new Goods & Services Tax (GST) tax, the mobile phones will attract 12% tax. This will raise the prices of handsets by 4-5%. Moreover, there would be no benefit of local manufacturing advantage over the imported ones. This will threaten investments in infrastructure service made under the Make-in-India push and slow down government initiatives like Digital India and Cashless India etc.

Quoting the disappointment over the announcement of 18% GST, Mr Rajan S Mathews, Director-General of the Cellular Operators Association of India (COAI), said: “It will augment the existing burden of the industry further. We had submitted to the government that consideration must be given to the present financial condition of the sector.”

Telecom industry is an essential service and it definitely needs some benefits and tax relaxation. Mr Mathews added that the industry has worked tirelessly and has fulfilled its prime motto of connecting everyone till the last mile connectivity. Considering the current financial condition of the Telecom sector, any rate beyond the existing 15 percent will burden the consumer indirectly.

Also Read: GST Impact - How Will GST Affect Telecom Sector?

Is GST One Nation-One Tax’?

Moreover, the telecom operators face a unique challenge with respect to IT and accounting as it is categorised into 22 telecom circles. On the other hand, the nation consists of 29 states and 7 Union Territories. Interestingly, around 12 telecom circles have multiple states in their jurisdiction, while 5 states have multiple telecom circles in their jurisdiction. This difference in telecom circles and state boundaries creates a lot of IT and accounting challenges which have to be addressed immediately.

If one observes the balance sheet of the telecom sector, more than 30 percent of its revenue is paid in the form of taxes and levies, including the spectrum usage charges and licence fees. If the new GST tax burden is imposed when the telecom sector is already bleeding due to a number of reasons then there would be an urgent need to bail-out.

Realising the sentiments, the Government should consider more sensitive treatment as it is an essential service in the development of the country.

Also Read: 37 Mobile Manufacturing Plants Set Up in India Providing 40000 Jobs