India’s telecommunication sector has requested government intervention in relation to the GST (Goods and Services Tax) which is set to be introduced on July 1st. India, which is home to one of the most competitive and volatile telecoms markets in the world – has called for the government to lower GST tax attributed to telcos in order to restore the financial health of the sector.
Reports emerging from the country say that the telecommunication organizations have claimed that it needs ‘urgent rescue and relief’ for the sector – and has requested that GST on telecom services be fixed at 5% - the same applicable to essential services, instead of the current rate of 18%. In addition to this request, telcos have also sought a meeting with officials from the revenue department in an effort to highlight some of the operational challenges under GST – and to discuss some of the solutions the government could provide which would enhance the ease of conducting business.
The owners of the leading telecommunications firms in India and its top executives have scheduled a series of meeting with a whole host of officials from different ministries in a bid to highlight the worsening health of the telecoms sector. It is also been reported that they will hold meetings with India’s telecom minister and the industry’s regulator. Separately, handset makers are seeking the intervention of finance minister Arun Jaitley to start the introduction of the GST a month later from August 1.
They’re claiming that there was insufficient time provided across the industry in order to facilitate the request, and seek clarification on the issue of continuity in duty differential that supported millions of dollars in investment towards the ‘Make in India’ initiative.
In a letter sent directly to revenue secretary Hasmukh Adhia earlier this month, telecom players through the Cellular Operators Association of India (COAI) said in order for telcos to achieve the objectives of the ‘Digital India’ initiative the government has to intervene. An excerpt from the letter said: “To achieve the goals of Digital India, we submit that the government extends urgent rescue and relief to the sector. The move to raise GST rates is contrary to the need of the hour, as it is going to effectively increase the tax burden on the end consumer, break the back of the industry further, and inevitably lead to a hike in telecom service prices.”
The demand for relief from the telecommunication sector in India comes just a fortnight after the finance ministry’s diktat that carriers cut prices of telecom services by tweaking costs after factoring in the benefits of increased tax credits that GST would bring. However, the industry vehemently disputes this derivation and is declared that the rates would go up when 18% GST is imposed.
The telecom sector lobby group COAI has not only sought the lowest slab of GST rate, but also amendments in transition provisions to include the carry forward of cenvat (central value added tax) credits of service tax paid on spectrum, which can be availed over three years at present. The industry’s demands include the following: The availability of input credit on telecom towers, the distribution chain of telcos kept out of the GST, the valuation of recharge vouchers maintained at MRP for ease of doing business, and exclusion of the reversal of credit under GST.