The National Anti-Profiteering Authority (NAA) has recently written to IndiGo and Airtel, both of which are market leaders in their respective industries, asking details of the GST input tax credit benefits occurred to the businesses of these entities and whether these benefits have created possibilities for a price reduction to end-consumers.
NAA was formed in November 2017 to ensure that GST rate reduction benefits are passed on by manufacturer/dealers to end-consumers.
The step was taken by the authority in order to gain a better idea of the impact of GST on the prices of services offered by telecom and aviation sector of India. The NAA has been asking the market leaders in the various sectors to provide details of the ITC benefits occurred after recent GST changes and whether these were enough to cause a reduction in the price of services.
The calculation of the same is required to be submitted by these companies within fifteen days. “The companies have been asked to submit the calculation within a fortnight,” a source said.
The telecom sector is reportedly not doing so well with GST only caused an increase in tax rate, however, the NAA still wants a report of the assessment. “there may not be enough room for passing on the benefits, but the NAA is seeking calculation from market leaders to assesses industry-wide impact,” the source said.
“We have not received any notice from the authorities asking for a report,” said an Airtel spokesperson.
The Indigo airline has however reported having passed on the GST reduction benefits to the customers in the form of reduced ticket prices. “The benefits of the GST rate reduction on tickets have been passed on to the customers by all airlines. We had a meeting with the competent authority to discuss the relevant details and have submitted the same for their review,” sais an Indigo spokesperson.
The GST regime which was implemented from July last year saw a hike of 3% (from earlier 15% to 18%) in the tax rate for the Indian telecom service sector, so clearly this sector has not seen a very positive impact, especially in the tax rate, post-GST. However, the telecom service providers can now claim ITC for their inputs, which should have brought down the negative impact of the increased tax levy.
In case of airlines, the tax rate for the economy class is the same as before GST, but the tax rate for business class travel is now 12% as opposed to the earlier 9% tax. However, the ITC benefits are again supposed to bring the cost down.
The Finance Ministry had also earlier instructed telecom operators to pass on the ITC benefits to their customers by reducing prices for their services. “The telecom companies are required to rework their costing and credits availability and rejig their prices and ensure that the increased availability of credit is passed on to the customers by lowering their costs,” said the statement released by the ministry.
