Telecom Industry deserves lower tax rate under GST regime: TAIPA

NEW DELHI: The Indian Telecommunication Infrastructure Industry has always supported and overwhelmed Goods and Services Tax (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’.

Telecommunication in India has emerged as a key driver of economic and social development in an increasingly knowledge intensive global scenario. The Indian telecommunication sector has undergone a revolutionary transition in the last two decades to become the World’s second largest telecommunication market with more than 1.1 billion subscribers connected through 4,50,000 towers mounted with over 15 lakh BTSs. As per the government report, the mobile sector’s contribution to GDP which is presently 6.5 percent and will increase to 8.2 percent 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 have invested more than 2 lakh 50 thousand crore.

Moreover, the sector has been Reconginised by the Government of India however there are no as such benefits that has been extended to sector so far now.

Most importantly, the visionary initiative of Prime Minister Narendra Modi such as Digital India, Smart Cities, E-Governance services and connecting the bottom of pyramid depends over the availability of critical telecom infrastructure.

Hence, the recent announcement on GST rate of 18 percent 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 cerate a robust telecom infrastructure to keep pace with technological advancements such as 5G, virtual reality, IoT and artificial intelligence.

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

Further,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, higher tax rate of 18 percent 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 have already lagged behind in connectivity either due to inadequate infrastructure or unviable business model.