Kolkata: India’s telecom operators may opt to seek clarification from the ministry of finance about bundled 4G handsets. Whether the handsets offered successfully for free would eventually attract the said 12% goods and service tax that applies to mobile phones.
Usually, it is the Government who should determine the GST cost implications of handset selling at zero prices. Also, it is the responsibility of the government to provide the essential guidance to telecommunication department about all the pros and cons regarding the structure of similar phones. Rajan Mathews, the director general of the Cellular Operators’ Association of India, said in a meeting.
Last week’s Reliance Industry’s launch of 4G handset might disrupt an already tense telecom industry. Jio has come up with a headset which comes for ₹ 1,500 only. The phone offers free voice service to the users. Additionally, the money would be refunded three years later lest the users return the handset in perfect condition.
Other than tax treatment, the telecommunication industry might look for clarification whether such financing plan would make the telecom operators avoid license payment fees and the charges for spectrum usage.
The telecom giants including Airtel, Vodafone or Idea have not yet funded such handset yet in the market. However, they too can launch schemes similar to Jio, lest they find it comfortable to use. The telecom companies now have 4 to 5 months to come up with plans similar to Reliance Jio.
According to Mathews, the mobile operators would try to find clarity regarding GST implementation because the implementation of GST system on a free phone would increase the cost of handset bundling schemes soon.
One of the top executives from a mobile company quoted that anyone can offer things for free. However, that does not mean that the asset in question lacks any assigned value. The government can always opt for information about the levy of tax and the value of the asset from the company.
It is known that GST cannot be imposed on refundable items. However, there is a potential area of question about tax treatment. The question might arise lest the mobile phones are not returned three years later. The telecom giants did not offer an immediate answer to this concern.
