DoT to analyse impact of GST, input credit benefit passed on to consumers

Govt feels monthly phone bills shouldn't rise, companies to pass on 2% input credit to consumers

The Department of Telecommunications, or DoT, will approach the finance ministry if consumers face problems due to the implementation of the new goods and services tax (GST), and bills have risen substantially.

Telecom Minister Manoj Sinha said they’d analyse the impact on both consumers and telecom companies. If any “genuine problems” arise, they’d approach the finance ministry.

The GST regime, in place from July 1, has a rate of 18 per cent for telecom services. The earlier service tax rate for telecom was 15 per cent. Industry body Cellular Operators Association of India (COAI) has said monthly phone bills would rise by two to three per cent, as a result.

However, the government feels bill amounts should not rise, as companies will get an input credit of two per cent, meant to be passed on to consumers.

“We will analyse what people were paying earlier, the impact of GST and whether input credit is being passed on,” said Sinha. 

With the two per cent input tax credit, he said, the effective rate in GST will be 16 per cent, not much higher than before. Also, the input tax credit for service tax paid on spectrum charges in 2016 may now be availed of in a single year, 2017-18, rather than over three years.

However, COAI had said, doing so would not reduce the cost for telecom companies, given the minuscule amount of interest benefit that will actually come out of this.

Sinha said there might be initial operational difficulty for telecom companies to claim their input tax credit, as they operate across the country and different states. The department, he stressed, was watching the way the tax worked and would take a call “very soon”, based on billing patterns. 

Telecom companies have sought reduction in the GST rate to five per cent, saying it’s an essential service.