Telcos urge govt to listen up, want uniform GST rate

Analysts are assuming that if the effective GST rate is at 18%, then telecom subscribers will have to shell out a little more as the current service tax rate is 15%

The devil, as they say, lies in the fine print. A day after Rajya Sabha passed the Constitutional Amendment Bill on goods and services tax (GST), the telecom sector has already come out with its wish list because the industry will be impacted negatively, if some concerns are not addressed.

Industry body Cellular Operators Association of India has urged the government to keep the tax rate applied for the telecom services to be no more than the existing 15 per cent to such that companies can deliver affordable services. 

While the actual rate has not yet been decided, analysts are assuming that if the effective GST rate is at 18 per cent, then telecom subscribers will have to shell out a little more, as the current service tax rate is 15 per cent.

Telecom service providers will have to pass on the higher taxes to consumers. Kotak Institutional Equities sees a marginally negative impact on the sector due to service tax rates moving higher to 17-18 per cent, from the current 15 per cent.

Other than asking for lower tax rate, the sector has highlighted other relevant issues that would need to be considered by the policy makers while finalising the GST legislation. The sector is concerned that given states have been given the flexibility to determine tax rates within their boundaries, this would prove to be a challenge for telecom companies due to non-alignment of Circle geographical boundaries with states and Union Territories.

Differential tax rates across states would lead to complexities and consumer complains. The sector has therefore sought uniform rate for telecom across states and UTs. Rajan Mathews, Director General of COAI: "We look forward to our continued engagement with the committee and working with them to make the implementation seamless, transformation meaningful and optimal".

The industry has also sought single Pan-India registration. Currently, the Model GST Law envisages every service provider to obtain registration in each State/UT from which it provides services. Since telecom services are highly regulated and provided in a seamless manner across States/ UT to over a billion customers, the industry has said that state-wise registrations may not be feasible for telecom sector to comply with.

For pan-India service providers, state-wise registrations would result in massive increase in compliance costs COAI said. Also, there could arise tax uncertainty due to multiple assessments and audits and cascading impact of taxes on account of credit blockages in each state without yielding any incremental revenue for the government. It is, therefore, imperative that telecom operators should be allowed to obtain single pan-India registration and seamless transfer of credits across States be allowed.

Mathews said: "COAI has been actively engaging with various policy makers on all aspects that have a material impact on the telecom industry. These relate to a single pan-India registration for the telecom operators, lower and uniform rate of tax for telecom services, determination of tax liability under GST, determination of transaction value for tax, self-supply of services based on State-wise registrations and various components related to admissibility of input tax credits."

Telecom sector's wish list

1) Keep GST rate at 15% levels to ensure affordable telecom services

2) Keep rates uniform across India

3) Sector worried about compliance if states levy higher rates within their boundaries

4) For telcos with a national presence, COAI has sought single Pan India registration as currently they are required to register at different states