In case you were too contended with Reliance Jio’s free voice call facility and imagining life to be as smooth as well, here’s a reason to make you worry. As the GST or Goods and Service Tax gets operational next April, you may expect telecom bills to go up.
The government has recently unveiled a four-tier GST structure, with rates of 5%, 12%, 18% and 28%, but has yet to announce segment wise rates. The sector is already being charged 15% of tax. While 12% GST would mean a major cut in the tax, experts believe the telecom industry won’t be given such leniency.
"Since telecoms is an essential service under Essential Services Maintenance Act, 1968, it was imperative that the GST rate should have been aligned with the merit rate of tax applicable for essential products and services, which is way below 15%,” Rajan Mathews, director-general of the Cellular Operators Association of India. COAI represents Bharti Airtel, Vodafone India, Idea Cellular and Reliance Jio Infocomm told the Economic Times.
A higher GST rate, he said, would hurt the common man the most and stymie growth of this critically important infrastructure sector. "It will have an inflationary effect on the overall cost of provisioning telecom services and increase costs for subscribers,” Mathews told ET. Consumers of mobile services would see an effective 3% rise in monthly cellphone bills with the GST rate pegged at 18% - this means, a consumer now paying a monthly bill of Rs 1,000 will have to spend Rs 30 more.
Mathews said continuation of central excise duties and state sales taxes on petro-products would also have a cascading impact on telecom companies, especially tower operators, since the telecom sector is the second-biggest buyer of diesel after the railways.