Telecom industry disappointed at unchanged GST rate

Industry body COAI today said it is disappointed with GST rate for telecom services remaining unchanged at 18 per cent.

The Cellular Operators Association of India – which has Bharti Airtel, Vodafone, Idea Cellular and Reliance Jio as members – has been pushing for lowering of Goods and Services Tax, or GST rate, for telecom services to five per cent in sync with essential services.

The debt-ridden industry has been saying that benefit of input credit is not enough to fully compensate the higher tax incidence in the new regime, and that telecom services are bound to become expensive for consumers once the new rates come into effect.

At present, telecom consumers are charged 15 per cent in form of tax and cess over their phone bills.

The GST Council, chaired by Union Finance Minister Arun Jaitley and having state counterparts as members, lowered tax rates on 66 of the 133 items demanded by various sections of the industry.

The apex industry body had highlighted that Singapore has a GST rate of only 7 per cent on telecom services, Malaysia (6 per cent), and Australia (10 per cent).

The COAI letter further added that the sector, which has over a billion consumers and offers one of the lowest voice call rates in the world, is undergoing one of its most disruptive phases. The sector is reeling under a “daunting” debt burden of Rs 4.6 lakh crore.

In the work week beginning Monday, telco owners and top executives are also set for meetings with a panel of officials from different ministries, or the inter-ministerial group (IMG), on the worsening sectoral health: Meetings with the telecom minister and the industry’s regulator are also scheduled this week. Separately, handset makers are seeking the intervention of finance minister Arun Jaitley to start the introduction of the GST a month later from August 1.

They cite insufficient preparation time across the industry for the request, besides lack of clarity on the issue of continuity in duty differential that supported millions of dollars in investments toward the Make in India initiative.