Telecom industry representative Cellular Operators' Association of India (COAI) on Friday said that the GST rate announced at 18 per cent will further stress the already bleeding sector.
The GST Council has finalised 18 per cent tax rate on most services, including telecom and financial services.
“We had submitted to the government that consideration must be given to the present financial condition of the sector and any rate beyond the existing rate of 15 per cent makes the telecom services more expensive for the consumer. It will augment the existing burden of the industry further,” Rajan S Mathews, Director General, COAI, said.
He said that this will also likely slowdown the planned rollout of infrastructure across the country and will have an impact on flagship government initiatives like Digital India, Cashless India etc.
During several rounds of meetings with the GST Council, representatives of the industry have brought forward issues related to smooth operation and expansion of telecom services such as place of business, centralised settlements, multiple jurisdiction in one LSA, place of supply, and MRP-based valuation.
Moreover, for the purpose of licensing, the country is divided into 22 telecom service areas or circles, for which the operators are given an operating licence for each individual circle, COAI said.
GST covers only 29 States and seven union territory divisions. Around 12 circles have multiple states as part of their territory, while five States have multiple circles in their territory.
Dichotomy between area covered by telecom circles and state boundaries would create significant IT and accounting challenges for operators, the industry lobby said.
It is noteworthy here that the telecom sector pays around 30 per cent of its earnings in taxes and levies, including spectrum usage charge and licence fees, the industry association said, adding that due to a number of reasons, including hyper competitiveness, the sector has come to a point that can be seen as just short of needing a bail-out.
Total debt for the sector is at around ₹4.5 lakh crore, while revenues are around than half this. Despite this, tariffs have been going in the opposite direction of inflation.
“As an essential service, the telecom industry needs some benefits and tax relaxation in order to provide a seamless and hassle-free service,” Mathews added.
Considering the massive impact of GST, the operators have already initiated the registration process involving migration to the GST regime.
However, clarity is still awaited on certain aspects of the published rules and the implementation is highly dependent on IT compatibility which requires sufficient time, COAI said.