Cellular Operators Association of India (COAI) said that it is disappointed with Goods and Services Tax (GST) rate for telecom industry remained unchanged 18 percent.
"We are disappointed that there has been no change in the GST rate for telecom, which is an essential service. It will increase the cost to consumers," PTI quoted COAI director-general, Rajan S Mathews.
COAI has also highlighted that Singapore has only 7 percent GST rate in the telecom industry.
Credit rating firm ICRA has also said that GST will have the marginally negative impact on telecom sector.
The report said the telecom services will become costlier with the increase in tax rate from 15 percent to 18 percent and will lead to lesser talk time on fixed denomination packs for prepaid users which account for almost 95 percent of the total user base in India. For telecom tower industry the tax incidence will increase to 18percent from 15percent (service tax).
However the same would be passed on to the telecom services sector, ICRA said.
ICRA further said that in totality, the impact of GST on the telecom industry will be marginally negative.
"It will augment the existing burden of the industry further. This is also likely slow down the planned rollout of infrastructure across the country and will have an impact on flagship govt initiatives like Digital India, Cashless India, and others," said Rajan S Mathews earlier said.
He said it is noteworthy here that the telecom sector pays around 30 percent of its earnings in taxes and levies, including spectrum usage charge and license fees. Due to a number of reasons including hyper-competitiveness, the sector has come to a point that can be seen as just short of needing a bail-out. Total debt for the sector is at around Rs. 4.5 lakh crore while revenues are around half of this. Despite this, tariffs have been going in the opposite direction of inflation.
Similarly, Uday Pimprikar, Tax Partner, EY India said that "Imposing 18 percent tax on telecom is likely to increase the overall tax burden and therefore may have a negative impact on the consumers' expenses. It needs to be appreciated that telecom is a necessity and an extremely important infrastructure service & resource and thus deserves more sensitive treatment."
The GST is all set to be launched on July 1.