As the Telecom Industry reels under the pricing war for more than two straight years now, the demand for streamlining GST issues is getting stronger with each passing day. Also, there is a general consensus among industry players now for trimming of tariffs. Reportedly, the telecom sector has been hit hard by disruptive offerings of Mukesh Ambani owned Reliance Jio
Cellular Operators Association of India (COAI) reached a joint agreement demanded to DOT for bringing into effect a Telecom Relief Package. The stern relief measures will enable the industry to get rid of the current deadlock. The telecom industry paralyzed by falling tariffs, low profitability, and rocketing debt-stressed stressed on:
- Relief in Licence Fee and Spectrum Charges.
- Release of GST Input Tax Credit
- Exemption from Custom Duty
The above are the primary pain points that have currently paralyzed the telecom sector. This has been equally highlighted by the sector regulator Telecom Regulatory Authority of India (TRAI) too.
The GST ITC
An estimated Rs 30,000 crore telecom capital is lying locked up as GST payments under the reverse charge mechanism. A major portion of this ITC has been levied as part of spectrum and license fee and spectrum usage charges. This Telecom ITC lying unused and unutilized could grant the much-desired impetus to the industry. Hence, a release or refund would be the right step ahead for breathing some fresh air into the choked sector.
This is not the first time when COAI has demanded a refund of ITC under GST. COAI has reasoned in the past that the accumulated ITC is unutilized and a release of such passive funds is an accepted norm in other jurisdictions too. Further, a release of unused funds was a prevalent practice under the now-defunct VAT Laws.
In the letter dated November 27, the COAI also demanded exempt from regulatory levies on license fee spectrum payment, and spectrum usage charges.
“Exemption of telecom regulatory levies from payment of GST would ease the overall working capital burden of telecom operators and would ease out cases of accumulation of credits,” the COAI said.
Custom Duty Hammer on Digital India
Besides the stagnant GST ITC, the COAI in another letter raised concern over the additional burden that the increases in customs duty will bring on telecom operators. Currently, the customs duty is 20%. But an increase will mean greater financial distress on the sector already sunk neck deep in debt.
The November 29th COAI letter to the Department of Telecom (DoT) demanded exemption from customs duty on the following list of telecom products and equipment.
- 4G and 5G Network Products.
- LTE Products.
- Telecom Sector Equipments.
The COAI termed the exemptions as a critical decision for realizing the Digital India Vision.
Polarised Telecom Sector?
This differences between industry participants good give reasons for second thoughts on the desired telecom relief package. While the COAI may present a united front in demanding the government relief package, not all telecom operators are part of the COAI chorus. Reportedly, DoT official say that not all industry participants have raised concern over the liquidity and spectrum price issues. In fact, a major player has outrightly disagreed with the COAI perception.
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COAI Director General Rajan Mathews has stressed that the Department of Telecom can make its own assessment of industry’s financial stress. Based on due diligence of the telecom department, a decision on telecom relief package can solely be taken on the ground realities and need not be influenced primarily by the majority or minority views.
