Business Other News 27 May 2017 Call charges need to ...

Call charges need to drop post GST, says Finance ministry

DECCAN CHRONICLE. | PAWAN BALI
Published May 27, 2017, 2:18 am IST
Updated May 27, 2017, 2:18 am IST
Finance ministry on Friday asked telecom firms to cut call rates after GST as under the new indirect taxation regime they will get various tax credits for goods and services used to provide telecom services in the country.
 Finance ministry on Friday asked telecom firms to cut call rates after GST as under the new indirect taxation regime they will get various tax credits for goods and services used to provide telecom services in the country.

New Delhi: Finance ministry on Friday asked telecom firms to cut call rates after GST as under the new indirect taxation regime they will get various tax credits for goods and services used to provide telecom services in the country. The ministry said these tax credits would reduce the “telecom companies’ liability to pay GST through cash to about 87 per cent of what they paid in the last fiscal.”

This means if telecom players cut call rates as asked by the finance ministry, even a three per cent increase in tax rate on mobile services will result in overall call cost for the consumer to either remain same or come down marginally after July 1. The Centre in the past has indicated that it will not shy away from implementing anti-profiteering clause if any firm refused to pass the benefit of GST to consumers.

Telecom,  one of the most used services in the country has been put under 18 per cent tax bracket  under GST against current 15 per cent tax rate, which had raised fears of increase  in monthly  mobile bills after July 1. “The telecom companies are required to re-work their costing and credits availability and re-jig their prices and ensure that the increased availability of credit is passed on to the customers by lowering their costs,” said the finance ministry.

Telecommunication services presently attract service tax of 14 per cent along with Swachh Bharat Cess (SBC) of 0.5 per cent and Krishi Kalyan Cess (KKC) of 0.5 per cent. Finance ministry said that while service tax is a pure value added tax, cesses are not. This is the reason that while no ITC (Input Tax Credit) of SBC is available, the ITC of KKC is allowed to be set-off only against KKC, it said.

Therefore, both the cesses are turn-over tax. “As against the above, the telecommunication services will attract GST of 18 per cent in the GST regime, which is a pure value added tax because full ITC of inputs and input services used in the course or furtherance of business by the telecommunication service providers would be available,” said the ministry.

Moreover, it said presently telecom service providers are neither eligible for credit of VAT paid on goods nor of special additional duty paid on imported goods/equipments. However, under GST, telecom service providers would avail credit of IGST paid on domestically procured goods as also imported goods.

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