GST: Indian telecom industry seeks clarity on VAS services

The telecom industry has urged the government to come out with a clear cut position with regard to levy of taxes on Value Added Services (VAS) in the Goods and Services Tax (GST) Bill, even as the firms across the entire value chain look forward to a smooth transition to much awaited GST, according to a joint ASSOCHAM-KPMG Paper said.

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“Given the broad framework of GST, it is expected that even under the proposed GST regime, the telecom service providers may face significant challenges. For the first time , both the Centre and State governments will have powers to tax services …The proposed GST law should support the government’s overall initiative of ease of doing business and offer a simplified tax regime to telecom service providers,” the paper said.

Certain VAS such as ring tones are regarded as entertainment under certain states ‘entertainment tax laws and are therefore subject to taxation, the paper said, adding that there is a dual levy in the form of service tax and entertainment tax since the service tax is also liable on the revenue generated from rendering such services.

“The government should clarify the applicable tax on such value added services. This would help move the industry move seamlessly to the GST, adding to the dynamic growth of the sector,” ASSOCHAM Secretary General D S Rawat said.

The KPMG, in its note said, the “growth of the sector is highly dependent on a forward looking policy and regulatory environment that fosters investment, innovation and productivity. However, the industry is grappling with a number of challenges around complexity in policy, regulatory and taxation framework that impacts implantation of well-intentioned ideas”.