The Finance Ministry has asked telecom companies to cut their prices and pass on the benefits that they would derive from GST implementation to the customers. According to the Government, telcos would benefit from input tax credit by as much as 2% of the turnover of the telecom sector. Moreover, they expanded that in the current tax regime telcos cannot avail benefit from VAT paid on goods nor from special additional duty (SAD) paid on imported goods. However, post GST implementation, they would be able to avail the benefit of integrated GST (IGST) paid on domestically obtained goods as well as imported goods.
The telecom companies on the other hand, are disputing the government’s observations and are of the view that the effective rise in tax levied on telecom services from the current 15% to 18% would be far more than the increase in input credit. In this situation, postpaid mobile users would have to pay 2-3% more on their monthly phone bills whereas prepaid users would also be negatively affected as their talk times would get reduced.