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Geography-linked curbs can have cascading GST impact on telcos, hit compliance: COAI

KOLKATA: Mobile phone companies have urged the government not to impose restrictions based on state geographical borders to overcome a sizeable cascading tax impact and compliance challenges under the proposed four-tier Goods and Services Tax (GST) structure. They have also reiterated concerns about the proposed increase in the GST rate of telecom services to 18% from the present 15% level, warning that such a move would hit consumers by way of higher call and data rates and also have a crippling impact on the financially-stressed telecom industry. "No state geographical boundaries must be imposed for GST compliance since telecom services are supplied seamlessly across India, and absence of a nuanced, sensitive treatment would see the telecom industry facing a massive amount of cascading taxes which would make the services more expensive," Rajan Mathews, director general of Cellular Operators Association of India, said in an official statement Thursday. The COAI represents India’s biggest telecom companies, Bharti Airtel, Vodafone India, Idea Cellular and newest telecom operator, Reliance Jio Infocomm among others. The plea for non-imposition of geographical border restrictions stems from the fact that telecom circle boundaries are not in step with state geographical borders in several markets like Delhi, the Northeast, Bihar-Jharkhand, UP-East-UP-West or MP-Chhattisgarh. Mathews also said a higher tax rate under the GST regime would increase costs for subscribers and also have an adverse impact on the government’s Digital India and financial inclusion initiatives. "Telecom is an infrastructure service designated as an essential service under Essential Services Maintenance Act, 1968, and is availed of by the masses. Any increase in the tax rate under the GST regime would have a direct impact by way of an increased cost burden on consumers," said the COAI director general. Last week, the Modi government unveiled a four-tier GST structure, with rates of 5%, 12%, 18% and 28%, but has yet to announce segment-wise rates. Industry executives expect the tax on telecom services to be 18% — tax at 12% is unlikely as it will mean a cut in revenue for the government.

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