New GST tax rate to impact Telecom Industry at large: TAIPA

The Indian telecommunication infrastructure industry has always supported and overwhelmed GST regime as it will help industry bringing in synergies among various departments, taxations and will ultimately enable ease of doing business by creating “one nation-one tax”.

As per the government report, the mobile sector’s contribution to GDP which is presently 6.5 per cent and will increase to 8.2 per cent by 2020.In a nutshell, the telecommunication towers are the backbone of telecommunication services in India. In order to create such a robust telecom infrastructure that can offer 3G, 4G and high speed broadband to match the pace of the developing nation India, the tower industry has invested more than rupees 2 lakh 50 thousand crore. Moreover, the sector has been recognized by the Government of India. However, there are no as such benefits that have been extended to the sector so far. Most importantly, the visionary initiative of Hon’ble Prime Minister Narendra Modi such as Digital India, Smart Cities, E-Governance services and connecting the bottom of pyramid depends on the availability of critical telecom infrastructure.

Hence, the recent announcement on GST rate of 18 per cent tax levy for telecommunication services will certainly impact the consumer at large. Further, non-availability of input tax credit (CENVAT credit) (under the plant and machinery) to tower infrastructure business will lead to huge impact on the cost of services and billing by IP-1 to Telecom Service Providers (TSPs), which will either be passed to consumers or it will further add on to the huge debt of TSPs due to the hypercompetitive market. It is worth highlighting that the sector further requires huge investment for in-building solutions, fibre and small cell deployment, etc in order to create a robust telecom infrastructure to keep pace with technological advancements such as 5G, virtual reality, IoT and artificial intelligence.

Tilak Raj Dua, Director General, TAIPA, said, “The prime objective of the Government to introduce GST was to ensure that there is no cascading effect of taxes. A higher tax rate and non-availability to input tax credit defeats the whole purpose of Hon’ble Prime Minister’s vision of ‘One nation, One Market, One Law’. In the number of discussions with the government, we have stated the impact of such non-inclusion and higher tax rates will further impact the overall financial health of the telecommunication industry.”

Dua added, “Needless to mention, mobile towers are the bedrock of visionary initiatives such as Digital India, Smart City and forthcoming advance technologies such as IoT, 5G and virtual reality, etc. Hence, a higher tax rate of 18 per cent and non-availability of input tax credit will lead to more burden on the overall telecom sector ultimately impacting the tower infrastructure roll out and thereby advance technologies too.”

Beside, this step will further impact infrastructure rollout in semi-urban areas and rural areas, a region which has already lagged behind in connectivity either due to inadequate infrastructure or unviable business model.