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GST for telecom sector faces inherent issues requiring a huge refresh

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NEW DELHI: Both houses of Parliament have passed the Goods and Services Tax (GST) bill. Moreover, 16 state assemblies have approved the bill. Meanwhile, states like Kerala will pass the GST bill by November. Hence the stage is set for the sending of the draft bill for President’s assent. According to sources, the government is working towards the development of an IT system, which will combine all kind of taxes.

The 122nd Constitutional Amendment Bill was passed unanimously by both the Houses of the Parliament. It introduces common Goods and Service Tax or GST and marks a new era in the administrative tax structure of the economy.

GST has problems with Telecom sector

Even though the introduction of GST brings in cheer, there are segment specific issues. These problems can be addressed in consultation with various stakeholders.

As far as telecom industry is concerned, the Bill will come with a bagful of opportunities and issues. The sector is already facing heavy pressure since the industry is unable to face challenges of high tax levies coupled with a huge tax burden. The arrival of GST will not end difficulties, but problems can be solved to some extent.

GST to reduce tax avoidance

GST is expected to simplify ease of doing business, address ambiguities in the current indirect tax regime in addition to bringing a unified tax approach. The new bill likely increases input credit base and reduce tax avoidance. The issues that need to be addressed are a sale of SIM card and supply of value-added services.

Arrival of GST increases tax in Telecom segment

The GST will also bring several challenges with special reference to Telecom sector. According to Chief Economic Advisor, Arvind Subramanian, the telecom sector anticipates 18 to 20 percent hike in tax rates from the existing rate of 15 percent. This will increase the burden on the financially crunched sector.

There is a scope of imminent price hike in both voice and data since operators will likely pass the burden of the surge to the end consumers. Most likely, telecom service can be classified as essential service and should be pegged at 12 percent tax slab. Furthermore, this will provide impetus to the Digital India initiative.

The forthcoming GST will make sure that the rates of taxes are low on services including smartphones so that the sector will stand affordable to all common people.

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Anand Narayanaswamy works as a journalist based in Trivandrum, India. After unsuccessfully completing the company secretary course, Anand decided to step into software and technology route. More recently, he had a great interest in exploring about the Goods and Services Tax.

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