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Telcos need to rejig their costing, prices under GST: Govt
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SME Times News Bureau | 27 May, 2017
After the Goods and Services Tax (GST) regime comes into effect, the
telecom companies will need to re-work their costing and prices, the
Finance Ministry said on Friday.
"After GST regime, telecom
companies would be required to re-work their costing and credits'
availability and rejig their prices and ensure that the increased
availability of credit is passed on to the customers by lowering their
costs," the ministry said in a statement here.
Telecommunication
services currently attract a service tax of 14 per cent, along with
Swachh Bharat Cess (SBC) of 0.5 per cent and 0.5 per cent Krishi Kalyan
Cess (KKC).
As against it, the telecommunication services will attract GST of 18 per cent in the GST regime.
However, full input tax credit (ITC) on inputs used in the course by the telecommunication service providers would be available.
"As
per some estimates, this additional ITC would be as much as 2 per cent
of the turnover of the telecom industry. Further, ITC of service tax
paid on assignment of spectrum by the government in 2016 is presently
allowed to be availed of by the telecommunication companies over a
period of three years," the statement said.
"In the GST regime,
the entire credit can be taken in the same year. Resultantly, the
balance two-thirds credit of the previous year would be admissible in
the current financial year itself. All of these would reduce the telecom
companies' liability to pay GST through cash to about 87 per cent of
what they paid in the last fiscal," it said.
At present, telecom
service providers are neither eligible for credit of Value Added Tax
(VAT) paid on goods nor of Special Additional Duty (SAD) paid on
imported goods/equipment.
However, under the GST, telecom service
providers would avail credit of Integrated GST (IGST) paid on
domestically procured goods as also imported goods, the statement said.
Communications
Minister Manoj Sinha on Thursday said that the telecom operators were
planning to meet the GST Council over the 18 per cent tax rate under the
GST.
"The sector was already paying 15 per cent tax. So, there
will be a difference of 3 per cent. We are looking at it. The telecom
operators are planning to meet the GST Council," Sinha had told
reporters.
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