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GST: Phone bills, insurance and banking to cost more

COAI feels an 18% rate under nationwide goods and service tax regime will further stress the sector

Arup Roychoudhury & Kiran Rathee  |  New Delhi 

Phone

Availing insurance, services, investing in mutual funds and paying mobile bills will get costlier with the Council setting a rate of 18 per cent for telecom and financial services. But, while telephone bills will surely rise, analysts are divided over to what extent financial services companies will pass on the increased tax rate to clients.

The existing service tax rate, including for telecom and financial services, is 15 per cent, including Swachh Bharat cess and Krishi Kalyan cess.

Industry body Cellular Operators Association of India (COAI) feels an 18 per cent rate under the nationwide goods and service tax regime will further stress the already bleeding sector.

“We are disappointed with announced rate of 18 per cent. 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,” COAI Director General Rajan S Mathews said.

He said the telecom sector pays around 30 per of its earnings in taxes and levies and due to a number of reasons, including hyper competitiveness, the sector has come to a point seen just short of needing a bailout. “As an essential service, the telecom industry needs some benefits and tax relaxation in order to provide a seamless and hassle-free service,” Mathews said.

“Imposing 18 per cent tax on telecom is likely to increase the overall tax burden and therefore may have a negative impact on the consumers’ expenses. It needs to be appreciated that telecom is a necessity and an extremely important infrastructure service & resource and thus deserves more sensitive treatment,” said Uday Pimprikar, tax partner, EY India.

On financial services, the 18 per cent rate will not apply to all the services provided by banks, companies, mutual funds and capital market brokers, said M S Mani, senior partner, Deloitte Haskins and Sells.

“Only fee-based services provided by banks, like issuing of cheque books and cards, will attract That would hardly be 10 per cent of a bank’s top line,” Mani said. He said for and mutual funds, the savings component will not attract GST, only the risk premiums will. For brokers helping in trades and banks participating in offloading of shares in the stock markets, will apply to the commission and fees they charge.

“Banks and companies will get credits, especially for business-to-business transactions. Hence, overall may not be detrimental to their businesses,” Mani said, adding that the additional service tax may only be passed to large business clients and not ordinary people availing such services.

Other analysts disagreed. “Life could have been considered as one of the sectors with a benign rate given the demographic situation in India and below-average penetration of life services,” said Divyesh Lapsiwala, indirect tax partner, EY India.

“The rate for insurance, clubbed with financial services has been announced at 18 per cent. This will increase the incidence of tax for customers from the existing 15per cent to 18 per cent. Having said this, the industry has also been seeking removal of exemption, for which we await the details in terms of announcement of the exemption list," said Gopal Balachandran, Chief Financial Officer at ICICI Lombard.

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GST: Phone bills, insurance and banking to cost more

COAI feels an 18% rate under nationwide goods and service tax regime will further stress the sector

COAI feels an 18% rate under nationwide goods and service tax regime will further stress the sector
Availing insurance, services, investing in mutual funds and paying mobile bills will get costlier with the Council setting a rate of 18 per cent for telecom and financial services. But, while telephone bills will surely rise, analysts are divided over to what extent financial services companies will pass on the increased tax rate to clients.

The existing service tax rate, including for telecom and financial services, is 15 per cent, including Swachh Bharat cess and Krishi Kalyan cess.

Industry body Cellular Operators Association of India (COAI) feels an 18 per cent rate under the nationwide goods and service tax regime will further stress the already bleeding sector.

“We are disappointed with announced rate of 18 per cent. 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,” COAI Director General Rajan S Mathews said.

He said the telecom sector pays around 30 per of its earnings in taxes and levies and due to a number of reasons, including hyper competitiveness, the sector has come to a point seen just short of needing a bailout. “As an essential service, the telecom industry needs some benefits and tax relaxation in order to provide a seamless and hassle-free service,” Mathews said.

“Imposing 18 per cent tax on telecom is likely to increase the overall tax burden and therefore may have a negative impact on the consumers’ expenses. It needs to be appreciated that telecom is a necessity and an extremely important infrastructure service & resource and thus deserves more sensitive treatment,” said Uday Pimprikar, tax partner, EY India.

On financial services, the 18 per cent rate will not apply to all the services provided by banks, companies, mutual funds and capital market brokers, said M S Mani, senior partner, Deloitte Haskins and Sells.

“Only fee-based services provided by banks, like issuing of cheque books and cards, will attract That would hardly be 10 per cent of a bank’s top line,” Mani said. He said for and mutual funds, the savings component will not attract GST, only the risk premiums will. For brokers helping in trades and banks participating in offloading of shares in the stock markets, will apply to the commission and fees they charge.

“Banks and companies will get credits, especially for business-to-business transactions. Hence, overall may not be detrimental to their businesses,” Mani said, adding that the additional service tax may only be passed to large business clients and not ordinary people availing such services.

Other analysts disagreed. “Life could have been considered as one of the sectors with a benign rate given the demographic situation in India and below-average penetration of life services,” said Divyesh Lapsiwala, indirect tax partner, EY India.

“The rate for insurance, clubbed with financial services has been announced at 18 per cent. This will increase the incidence of tax for customers from the existing 15per cent to 18 per cent. Having said this, the industry has also been seeking removal of exemption, for which we await the details in terms of announcement of the exemption list," said Gopal Balachandran, Chief Financial Officer at ICICI Lombard.

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Business Standard
177 22

GST: Phone bills, insurance and banking to cost more

COAI feels an 18% rate under nationwide goods and service tax regime will further stress the sector

Availing insurance, services, investing in mutual funds and paying mobile bills will get costlier with the Council setting a rate of 18 per cent for telecom and financial services. But, while telephone bills will surely rise, analysts are divided over to what extent financial services companies will pass on the increased tax rate to clients.

The existing service tax rate, including for telecom and financial services, is 15 per cent, including Swachh Bharat cess and Krishi Kalyan cess.

Industry body Cellular Operators Association of India (COAI) feels an 18 per cent rate under the nationwide goods and service tax regime will further stress the already bleeding sector.

“We are disappointed with announced rate of 18 per cent. 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,” COAI Director General Rajan S Mathews said.

He said the telecom sector pays around 30 per of its earnings in taxes and levies and due to a number of reasons, including hyper competitiveness, the sector has come to a point seen just short of needing a bailout. “As an essential service, the telecom industry needs some benefits and tax relaxation in order to provide a seamless and hassle-free service,” Mathews said.

“Imposing 18 per cent tax on telecom is likely to increase the overall tax burden and therefore may have a negative impact on the consumers’ expenses. It needs to be appreciated that telecom is a necessity and an extremely important infrastructure service & resource and thus deserves more sensitive treatment,” said Uday Pimprikar, tax partner, EY India.

On financial services, the 18 per cent rate will not apply to all the services provided by banks, companies, mutual funds and capital market brokers, said M S Mani, senior partner, Deloitte Haskins and Sells.

“Only fee-based services provided by banks, like issuing of cheque books and cards, will attract That would hardly be 10 per cent of a bank’s top line,” Mani said. He said for and mutual funds, the savings component will not attract GST, only the risk premiums will. For brokers helping in trades and banks participating in offloading of shares in the stock markets, will apply to the commission and fees they charge.

“Banks and companies will get credits, especially for business-to-business transactions. Hence, overall may not be detrimental to their businesses,” Mani said, adding that the additional service tax may only be passed to large business clients and not ordinary people availing such services.

Other analysts disagreed. “Life could have been considered as one of the sectors with a benign rate given the demographic situation in India and below-average penetration of life services,” said Divyesh Lapsiwala, indirect tax partner, EY India.

“The rate for insurance, clubbed with financial services has been announced at 18 per cent. This will increase the incidence of tax for customers from the existing 15per cent to 18 per cent. Having said this, the industry has also been seeking removal of exemption, for which we await the details in terms of announcement of the exemption list," said Gopal Balachandran, Chief Financial Officer at ICICI Lombard.

image
Business Standard
177 22