Indian telecom operators, through lobby body, the COAI, are planning to write to the finance and telecom ministries to lower the proposed goods & services tax (GST) rate of 18% on telecom services to 12%. With this move, the telcos aim to ensure parity with the applicable tax rate for mobile handsets, while pushing for an extension to the July 1 deadline for implementation of the new tax regime, according to a report in Economic Times.
The body is expected to seek logic behind the finance ministry’s decision to impose an 18% GST rate on telecom services while choosing to levy a 12% tax on mobile handsets.
COAI director general Rajan Mathews told the publication that telecom operators would seek to lower the GST rate for telecom services and question the government’s decision to levy a lower GST of 12% on all sorts of mobile phones, including top-end 4G smartphones, “and in the same breath make access to an essential service like telecom more expensive by slapping a much higher GST rate of 18%.”
The report also added that telecom operators might also seek an extension of the July 1 deadline for GST implementation as they are not in a position to meet the timeline, and may cite accounting and technological challenges.
Mathews said the body would reiterate that telecom is an essential-cum-emergency service under the Essential Services Maintenance Act, and is availed of by the masses.
ICRA in its recent note said that an increase of in tax rate from 15% to 18% after the introduction of the Goods and Services Tax (GST) will result in costlier telecom services, which will lead to lesser talk-time on fixed denomination packs for prepaid users which account for almost 95% of total user base in India.
The Indian government recently had asked telecom service providers to rejig cost and lower prices to pass on the benefits of tax rate reduction under the Goods and Services Tax (GST) to customers in the country from July this year. “After GST regime, telecom companies would be required to re-work their costing and credits availability and re-jig their prices and ensure that the increased availability of credit is passed on to the customers by lowering their costs,” the Finance Minister said in a statement.
Indian telecom operators recently expressed disappointment over the introducing of the GST rate of 18% on telecom services and said that this would further stress the already bleeding sector. They said that the move would slow down the planned roll-out of telecom infrastructure across the country, thereby impacting initiatives like Digital India, Cashless India.