COAI has welcomed the four-tier structure, ranging from 5% to 28%, announced by the GST Council for speeding up the implementation of the Goods and Services Tax , one of the biggest indirect tax reforms in India.
All operators believe that passing of the GST Bill will prove to be a significant step in simplifying the taxation procedure in the country, improving ease of doing business and achieving transparency.
COAI, the cellular operators association of the country, said it was hopeful policy makers would make plausible amendments in the draft model GST law that would give due consideration to prevailing concerns in the telecom industry.
Speaking about the new structure, Rajan S Mathews, Director General, COAI, said, “Determining different tax rate slabs under the GST reform is a crucial step towards the implementation of a uniform tax policy. The industry is hopeful that being an essential service, it shall be placed in the merit rate slab and also believes the GST Bill will address taxation, compliance and transparency issues to support the growth of businesses in the country under the visionary leadership of Prime Minister Narendra Modi. The telecom industry is unique and is regulated on the basis of 22 mobile telecom circles out of which 12 circles are having geography spread across more than one State. Similarly, national long distance and international long distances are national licences. The regulations require to value only certain specific activities for the purpose of licence fee calculation when undertaken across circles such as interconnect User Charges, roaming charges, termination charges, etc. The telecom industry is committed to ensuring that GST is a success and has urged the Government to consider that restrictions based on State geographical boundaries are not imposed for tax compliance purposes since telecom services are supplied seamlessly across the country and it is impossible for the industry to track, value and comply for inter-state transactions in multi-state circles, whereas these are revenue neutral too. “
Mathews further added that pre-paid telecom offerings are supplied through printed pre-paid vouchers as well as electronic top ups. About 30 lakh distributors and retailers are engaged in the resale of the same which earn them meagre margins. On estimated basis @ 18% the tax revenue shall not exceed INR 2000 cr on annualized basis across the country. Thus, levy of GST on MRP, payable by telecom operators is logical step as it ensures full tax revenue for the Central as well as State governments and removes the burden of compliance and its administration on lakhs of small distributors and retailers.
The industry body has also represented the above points before Department of Telecom, and they were assured that the industry concerns shall be shared with Ministry of Finance for consideration.
The paradigm shift in India’s indirect tax regime can play an enabling role in the growth of key sectors, including telecommunication. Greater connectivity will form the backbone of our Smart Cities, rural areas and assist in financial inclusion agenda, which is only possible with policies that take into account all challenges.
“There are certain aspects relevant for the telecom sector that would need to be evaluated by the policy makers while finalising the GST legislation including no tax on self-supply between two registrations of same legal entity across States, MRP based taxation of pre-paid offerings and place of supply for determination of tax liability under the reform,” Mathews said.
COAI has been actively engaging with various policy makers on all aspects that have a material impact on the telecom industry. These relate to a single pan-India registration for telecom operators, lower and uniform rate of tax for telecom services, determination of tax liability under GST, determination of transaction value for tax, self-supply of services based on state-wise registrations and various components related to admissibility of input tax credits. The industry will continue to work with the Government and provide regular inputs for a vibrant and healthy ecosystem.
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