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Government Asks Telcos To Cut Prices And Pass GST Benefits To Customers

In order to provide GST benefits in each sector, the Indian government is taking significant steps. Recently, it asked the telecom service providers to rejig costs and lower the prices to deliver the benefits of tax rate reduction under the Goods and Services Tax (GST) to customers, which will be implemented in July in the country.

After the implementation of GST, the telecom companies will have to restructure the costing and credits availability and re-jig the prices to ensure that the improved availability of credit is delivered to the customers. This was hinted by the Finance Minister in a statement issued on Friday.

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According to the new tax structure, 18% tax will be implemented in the telecom sector which is a pure Value Added Tax. This is because full input tax credit (ITC) of inputs and Input Services used in the course or furtherance of business but the telecom service provider would be available. In the present scenario, the telecom industry is bound by 14% tax with an addition of Swachh Bharat Cess (SBC) of 0.5% and Krishi Kalyan Cess (KKC) of 0.5%.


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However, the Swachh Bharat Cess and Krishi Kalyan Cess are not a pure value-added tax. And due to this, the ITC of Krishi Kalyan Cess is allowed to be set-off only against Krishi Kalyan Cess and not on Swachh Bharat Cess. For now, the telecom service providers are neither eligible for a credit of VAT paid on goods nor of Special Additional Duty (SAD) paid on imported goods/equipment. But, under GST, the telecom service providers will get a credit of IGST paid on domestically procured goods as additional imported goods.

Under GST, the complete credit can be taken in the same year. This results in the balance two-third credit of the previous year would be admissible in the current financial year. This will reduce the liability to pay GST through cash to about 87% of what they paid in the last fiscal. With the implementation of GST, accounting and technology related challenges for Indian telecom operators will arise in 12 telecom circles.

This will also force telecom service providers to invest Rs. 300 crore in modernizing or overhauling their existing IT and billing systems. But, the telecom operators are not acknowledging the implementation of GST as the industry is already going through a bad phase. With the new tax structure, the progress would slow down the planned roll-out of telecom infrastructure across the country. Let’s see how the new tax structure shapes the telecom industry.


Abhishek Bhatnagar

Abhishek Bhatnagar, a known technology blogger & YouTuber from India. A Software Engineer by qualification, now he works as the editor-In-Chief, Webmaster, & Managing Director at Gadgets To Use. He runs a number of other technology websites as well.