With GST Telcos May Face Tough Challenges: Assocham


The much awaited GST (Goods and Services Tax) bill is expected to overcome all hurdles and see passage this monsoon session however a study said it may pose various challenges for the Indian telecom operators because of possible dual taxes and lack of clarity.

“Given the broad framework of GST, it is expected that even under the proposed GST regime, the telecom service providers may face significant challenges,” says a recent joint study by Assocham and KPMG. “For the first time , both the Centre and State governments will have powers to tax services …The proposed GST law should support the government’s overall   initiative of ease of doing business and offer a simplified tax regime to telecom service providers,” the paper pointed out.

The paper had taken examples like VAS as a service into account. It said certain VAS such as ring tones are regarded as entertainment under certain states ‘entertainment tax laws and are therefore subject to taxation.

“Since the service tax is also liable on the revenue generated from rendering such services, there is a dual levy in the form of service tax and entertainment tax”.

The paper aid the telecom industry has impressed upon the government to come out with a clear cut position with regard to levy of taxes on Value Added Services (VAS). However, it also said that firms across the entire value chain look forward to a smooth transition to the much awaited GST, an Assocham-KPMG Paper has said.

“The government should clarify the applicable tax on such value added services. This would help move the industry move seamlessly to the GST, adding to the dynamic growth of the sector,” D S Rawat, Assocham’s secretary said.

The paper  said the GST law should provide clear and comprehensive provisions with respect to coverage of ‘telecom services ‘for providing clarity of levy of taxes on VAS, infrastructure sharing and e-commerce transactions, since these transactions could have different treatment under GST.

The KPMG note said, the “growth of the sector is highly dependent on a forward looking policy and regulatory environment that fosters investment, innovation and productivity. However, the industry is grappling with a number of challenges around complexity in policy, regulatory and taxation framework that impacts implantation of well-intentioned ideas”.

Besides, the joint Assocham-KPMG Paper said, clear and specific place of supply rules should be notified for telecom services, specifically for pre-paid services, B2B transactions, B2C transactions, mobile wallet, VAS etc. “This will help determine the State in which telecom services would be deemed to have been provided”.

Moreover, the paper said, in GST there should be simplification of overall tax procedures such as a single unified registration for all the states, sharing of tax revenue from telecom service among central and state government without involvement of operators.

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