Telcos Will Discuss Impact Of GST With IMG
The government has set GST for telecom services higher than 15% that telcos currently pay towards service tax.
“Telcos will make a presentation to the IMG (inter-ministerial group) next month on the dismal financial health of the heavily debt-laden telecom industry and communicate their disappointment by stressing how a higher GST of 18% will further hurt the sector and undermine company earnings in coming quarters,” said Rajan Mathews, director-general of the Cellular Operators Association of India.
Telcos, Mathews said, are likely to seek the panel’s early intervention through suitable corrective measures since the higher GST rate could hurt bottom lines, increase balance sheet stress levels and undermine the overall ability of the telcos to repay their mammoth dues.
In next month’s presentation to the panel, telcos are likely to stress that the telecom industry is among the heaviest taxed sectors and already pays about 30% of its earnings in taxes and levies, including spectrum usage charge and licence fees, and a higher payout towards GST from July will only make matter worse at a time when this hyper-competitive sector is in the midst of a brutal price war.
At present, telcos pay about 8% of revenue towards license fees and another 3% as spectrum usage charge.
Mobile phone bills are set to get costlier and talk time for prepaid users will stand reduced with the government pegging GST for telecom services at 18%.
According to tax experts, unlike other sectors such as automobiles, the beneficial impact of increased tax credits will be negligible for telecom companies, which will make voice and data services more expensive for the consumer, and in turn, may hit consumption levels and telco earnings.