The telecom and airline sectors have come under the scanner of the National Anti-Profiteering Authority (NAA) for the goods and services tax (GST).
The government is asking market leaders in each sector if the benefit of rate reduction on account of input tax credit (ITC) has been passed on to the end consumer. In this regard, the NAA has written to IndiGo, largest airline by market share, and Airtel, which has the same position in the telecom sector. Their letter seeks details of the ITC benefits that have accrued to the entity and whether that created room for a price reduction to consumers. "The companies have been asked to get back with the calculation," an official said.
The tax on telecom services was raised to 18 per cent under GST last year, as against a 15 per cent service tax levied earlier. However, telecom companies were also allowed tax credit on a number of inputs. Which, the government says, should have brought down the tax burden and translated into price reduction for end-consumers.
With airlines, the GST rates for economy class travel are five per cent and for business class, 12 per cent, along with ITC benefit. Under the service tax regime, the rates were five and nine per cent, respectively.
An executive from a top telecom company says the tax credit benefit on a majority of inputs was already available to the industry in the erstwhile tax regime. "The incremental ITC benefit is marginal and far lower than the increase in rate of output tax. Further, there has been a reduction in prices of telecom services over the past several months," said the executive.
Beside, owing to financial stress in the sector, companies in it have been seeking relief from the government in respect of seamless credits, including on towers and reduction in ITC build-up on account of reverse charge on the many regulatory payments to various state authorities.
An Airtel spokesperson said they had yet to get any notice for a report in this regard.
Last year, the finance ministry had asked telecom companies to rejig costs and lower their prices, to pass on the benefits of GST to customers.
The NAA was set up in November 2017, to ensure the benefit of rate reduction or reduced tax incidence was passed on to end-consumers. It was also empowered to take action on its own initiative.