GST Rates On Services: Telecom Industry Disappointed
The rate will further stress the already bleeding sector, industry body COAI said.
The Goods and Services Tax (GST) Council's decision to tax telecom services at 18 percent, as opposed to the current 15 percent rate, will make telecom services costlier for customers, industry experts say.
Given the present condition of the sector, any rate beyond the existing 15 percent rate will make telecom services more expensive for the consumer, said Rajan S Matthews, Director General of industry body Cellular Operators Association of India (COAI), in a media statement.
The rate announced at 18 percent will further stress the already bleeding sector.COAI Media Statement
This may also slowdown the planned rollout of digital infrastructure in the country, while impacting flagship government initiatives like Digital India, Matthews added.
Sanjay Kapur, former chief of India's largest telecom player Bharti Airtel Ltd. said that the government by increasing the GST rate on telecom services had let go of an opportunity to bring the sector under essential services. The higher rate contradicts the government’s stated position that it is concerned about the profitability of the sector.
There was room to treat telecom as essential services and keep the rate around 12 percent.Sanjay Kapur, Former CEO, Bharti Airtel
GST will also lead to cumbersome administrative work for telecom companies, he explained, since the Department of Telecom levies are on a circle-wise basis while GST is applicable state-wise.
The administrative work would increase as two sets of accounts have to be maintained. That is extra work for telecom companies. There has to be simplicity on calculations.Sanjay Kapur, Former CEO, Bharti Airtel
‘Prepaid Users To Be Hit In Near Term’
There could be a short-term disruption in the telecom sector, but it should normalise after some time, said Nitin Soni, Director at Fitch Ratings. "Prepaid usage might be hit temporarily", he said.
COAI estimates the total debt of the telecom sector at around Rs 4.5 lakh crore and revenue to be half of that. It argued that despite such a scenario, tariffs across the sector have been going down.
As an essential service, the telecom industry needs some benefits and tax relaxation in order to provide a seamless and hassle-free service.Rajan Matthews, Director General, COAI
The statement, however, added that the telecom industry is committed to the successful rollout of GST.