"GST will make systems more accountable and governance more open and transparent..."

Rajan S. Mathews
Director General, Cellular Operators’ Association of India (COAI)

How is GST a significant milestone for the Indian economy? 
GST is a historic and path-breaking taxation system, and the telecom industry wholeheartedly supports it. It will truly introduce the long-desired structure of One Nation-One Tax and put India at par with several other nations and strengthen the federal structure while allowing businesses to grow without the hindrance of multiple tax structures. For the telecom industry specifically, which operates out of 22 telecom circles, GST will introduce a more streamlined structure of taxation. In the long run, the telecom players can reap the benefits both in terms of time and tax saved.

The industry, while welcoming this iconic reform, has also requested the government to lower the tax rate from 18% to at least 12%, as telecom is an essential service and currently the industry is in extremely poor financial health. Also, with the Inter-Ministerial Group (IMG) taking up the issues related with the financial health of the telecom sector, it will be prudent that the sector is given due relaxation so that it can come out of its present woes and the market can mature as it moves from voice-led to data-driven.

COAI members have implemented GST. Please explain? 
Yes, we have all implemented GST, and are fully aligned with the government. The industry has been preparing itself for this for the past year in all earnest, and we are confident that any issue which crops up during the process of implementation will be handled with due expertise and maturity. The industry also strives to provide the best possible services to the consumers, while contributing wholeheartedly to the national goals and the Prime Minister's vision of Digital India. It must be noted here that our members have been working very hard and these efforts have only intensified over the past many months to ensure a smooth rollout of this unique taxation system.

It is, indeed, a unique opportunity for all of us to participate, and we will make our best possible efforts to ensure that everything goes as planned, and with as little issues as possible. 

What were the operational challenges in implementing GST? 
For the telecom industry, the biggest challenge perhaps was to put in place mechanism which will ensure a smooth transition and minimum hassles for our billion-plus consumers. All the telecom operators, therefore, started working towards this goal in all earnest, and some of the best brains were made responsible for the smooth execution of this herculean task.

However, there are a certain operational issues that we are still grappling with. These mainly relate to the fact that for telecom services the country is divided into 22 circles or service areas, while GST is mapped to 29 states, and seven union territories. Dichotomy between the area covered by telecom circles and state boundaries would create significant IT and accounting challenges for operators. There are also issues regarding billing across overlapping states, circles and operators. 

In many cases, tax has already been paid on existing stock. But under the new regime, telcos will have to pay tax on MRP at the time of supplying to channel partners. Accordingly, we have requested that credit for tax paid on vouchers be allowed or be exempt from GST.

Similarly, there are a number of other areas where there is lack of clarity. We have specifically requested that the government gives more clarity on issues like determination of transaction value for tax, self-supply of services based on state-wise registrations and various components related to admissibility of input tax credits.

The industry is committed for a seamless execution and to continuing to work with the government for an early resolution.

How has GST implementation helped telecom operators in terms of ease-of-doing business? 
In the long run, it will definitely help the telecom operators. While GST will save a massive amount of man hours, it will also help us save money, which we used to pay under several tax heads. GST has always been a system to look forward to, by the business community and for an industry like telecom which operates on pan-India level, it is an ideal system, helping overcome multiple, cumbersome, separate tax compliances required by individual states.

How will digital transactions through GST help in increase in business for the company? 
Digital transactions are going to be the way forward for doing business very soon. For businesses which operate in volume and big numbers, it provides easy access to the data and helps streamline the cumbersome taxation process. GST will make systems more accountable and governance more open and transparent, thus easing business processes all around.

How will GST support “Make in India” initiative in the long run? 
GST will put in place the much-needed and robust taxation process and will bring the whole country under a single unified tax system. It is an ideal system to have, when we talk about corporates from other countries coming to India for setting up their production base. It enhances the rate of investment and eliminates any taxation and regulatory errors in the future, thereby facilitating ease-of-doing business in the country as well and making India a more investment-friendly destination. This is critical for telecom as a sector in which 100% FDI has already been allowed by the government.

What are the future challenges with respect to GST which needs to be implemented as per government regulation? 
The fact is that, even at the current rate, the tax rate is much higher in comparison to other countries. Singapore has a GST rate at only 7% on telecom services, Malaysia 6% and Australia 10%. Telecom services are a key to the country’s economic growth and fulfilling the government’s marquee programmes like Digital India. We had requested that ideally, the rate be fixed at 5%. But unfortunately contrary to our submission the tax has been raised to a rate of 18%, from 15%. This will have an additional crippling effect on the industry, if other forms of relief are not provided. The additional costs involved in implementing the new tax reform, coupled with the higher rate, are also likely to slow down the planned rollout of communications infrastructure across the country. Further, there are challenges of IT compatibility which are still being addressed. 

Telecom is an essential service and it needs timely interventions and favourable policies so that these services are able to reach everyone. It has been the industry’s continuous endeavour to connect the unconnected, deliver government services to every corner of the country and support the vision of Digital India. We are fully committed to the Prime Minister's goals for a better, connected, developed and empowered India.