After demonetisation last year, the Indian government is all set to introduce GST (Good & Service Tax) this year and it has already become the nightmare of many.
At present, telecom services attract 15% service tax, but once the new 18% GST rate kicks in, consumers will see an effective three percentage point rise in their phone bills. This means a consumer now paying a monthly bill of Rs 1,000 will have to spend Rs 30 more. Also, the prepaid users will get a significantly less amount of talk time on a recharge.
Broadband and Internet services DEN BOOMBAND, which is a part of the NSE-listed DEN Networks, said in a statement-
“Due to the GST rate of 18 per cent applicable with effect from 1st July 2017, your recharge amount will increase.”
Ex-CEO of Bharti Airtel Sanjay Kapoor was bewildered by the decision, especially at a time when the telecoms sector is passing through extreme stress. He said-
“The decision is a surprising one, given that you have an inter-ministerial panel looking into the financial woes of the sector, and the same time the government choosing to slap a higher GST rate that will hit consumption and negatively impact telco revenues,”
However, at the same time, cable and DTH (Direct-To-Home) bills are expected to come down in many states as so far these services attracted an entertainment tax in the range of 10-30 percent over and above the service tax levy of 15 per cent.
GST is touted as the single biggest tax reform since India’s independence in 1947 and is expected to add 2 percent to India’s GDP (gross domestic product). It aims to subsume the various central and state taxes that are currently levied on goods and services, bringing India under a uniform tax regime.
Telecom companies, already weighed down by high taxes and levies, now need to contend with an additional 3% tax with the shift to GST. A service tax of 15% applied to telecom services earlier. Post-paid subscribers will see a roughly 2.6% additional to their gross bill. But incumbents such as Bharti Airtel Ltd and Idea Cellular Ltd are likely to absorb the additional cost for many of their pre-paid tariff packs. On the other hand, the availability of input tax credit is expected to reduce operating costs and capital expenditure. Thus, the impact on profit margins could be small.
What do you think about it? Do you stand in GST’s favour or think it will only add to common men’s misery? Share your thoughts with us.