GST Impact on Indian Telecom Industry

India’s web of telecom industries is the world’s second-largest wireless market, which includes over a billion active users. The scales shown by them show their efforts to become one of the biggest success stories in the country. Work done by these firms literally has revolutionized the lives of people here.

The telecom sector of India can basically be divided into three parts, the telecom service providers, infrastructure providers and equipment manufacturers. The tower companies had been involved in legal activities referring the accrual of tax credits. There was strict requirement of a system which can uphold the seamless tax inputs for this particular sector by which the finalized result might not be a burden.

Latest Update in Telecom Sector Under GST

• 53rd GST Council Meeting: “Clarification regarding the time of supply in respect of allotment of Spectrum to Telecom companies in cases where payment of licence fee and Spectrum usage charges is to be made in instalments”
• The telecom sector has requested to finance minister regarding the refund of goods and services tax ITC credits under the new tax regime. Said, officers.
• The Telangana AAR has given an important judgement that GST levy on telecom services which is provided to Hyderabad Municipal Corporation by Bharti Airtel Limited. Read More

After getting involved with various tax issues, the government of India finally come up with a greatest indirect tax reform of the country termed as Goods and Service Tax (GST). GST is passed as a 122nd Constitutional Amendment Bill and has been approved by both houses of the Indian Parliament and GST bill and has been implemented from 1st July, 2017.

Read Also: GST Impact on Insurance Industry in India

The euphoria of GST brings in sets of cheers, but nothing can be implemented with 100 percent accuracy and without having any issues. There are some sector-specific issues related to GST, especially with the telecom sector. The GST plans related to telecom sector of the country may be needed to figure out once again, as it seems to come as a mixed packet of sweet and sour candies for this sector. Struggling with high taxes, the sector is already under a burden.

Talking about the advantages, GST comes with an ease in operating the business and having a unified tax approach. It is expected to reduce tax avoidance and increase input credit. But as we have mentioned above, good things can not come without having any drawback in it. The tax rate after GST is now 18 percent from the previous 15 percent resulting in a load over the telecom sector which is already under financial burden.

The next issue in sight is that, the telecommunication firms currently works for area or circle wise service, but generating a state-wise revenue will result a large number of IT firms and accounting systems, and will need a great increment in compliance effort, multiple audits, multiple assessment, and a chain impact of taxes on account of credit blockages in each and every state.

Next problem which arises in the current scenario is of petroleum. The GST will also impact the oil and gas sector and eventually we would get to see the aftereffects on the depending sectors as well. Telecom sector of the country is the second largest diesel consuming sector after railways. If petroleum products remain outside the GST bill then it will be very difficult for tower companies to set of their input liabilities.

It may be too early to make any proper statement about the upcoming historic tax reform in the country. But it is a requirement to make an absolute implementation of the plan to get improved results and benefits.