The Cellular Operators Association of India plans to write down to the Department of Telecommunications to elucidate how their burden will ease if cost of regulatory levies by telcos is exempted from GST, folks conversant in the matter stated. Alternatively, they’re searching for a refund of input tax credit score of about Rs 30,000 crore as a result of they’re unable to set it off in opposition to GST by charging their customers on account of intense competitors and low tariffs.
“At an industry level, almost Rs 30,000 crore is stuck for all operators due to GST blockage,” stated an individual conscious of the matter. COAI didn’t reply to ET’s queries on the difficulty.
The input tax credits have accrued since GST was launched in July 2017 and are impacting the stability sheets of Telecom Companies encumbered with debt of Rs 7 lakh crore and searching for a reduction bundle from the federal government.
“The credit includes a significant portion of tax being imposed on government levies such as licence/ spectrum fees. The tax on such government levies or other procurements was never meant to have a cascading impact. However, given the present inability to utilise credits, the taxes on these procurements are blocked,” stated Uday Pimprikar, associate, tax and regulatory providers, at EY India.
“The working capital challenges of the Telecom sector can be partly alleviated by enabling a speedy refund of accumulated input tax credits. It is also essential to deal with the issues of declining average revenue per user, which may lead to further accumulation in future on account of the significant capex spends by the sector,” stated MS Mani, a associate at Deloitte India.
Industry specialists stated the accrued input tax credit score is impacting the working capital of telcos. COAI had stated earlier that debt restructuring, a lower in licence fees and spectrum prices, and the discharge of input tax credit score locked up with the federal government are among the many steps that may alleviate their stress.
Competition triggered by the entry of Reliance Jio Infocomm in September 2016 has resulted in consolidation that’s decreased the eight-operator market to a few personal Companies – Bharti Airtel, Vodafone Idea and Jio.
ET reported final week that the federal government is contemplating a reduction bundle for the Telecom trade.