CSPs, barring Reliance Jio, have asked the government to waive GST on spectrum payments and other levies, while adjusting accumulated tax credits of Rs 35,000 crore in the pending payments. In a letter to the telecom minister, Manoj Sinha, the COAI has appealed that value-added tax or GST is not applicable to government services internationally, as they are considered out of scope or regarded as non-economic activities or sovereign functions that are outside the ambit of tax.
“Therefore, in line with the international practices, payment of regulatory levies (licence fees (LF), spectrum usages charges (SUC), and spectrum payments) made by telecom operators should be exempted from tax under GST. The same could be achieved by issuing exemption notifications as per provisions stipulated under GST Act,” says COAI director-general, Rajan S Mathews in the letter.
According to a report of the Telecom Regulatory Authority of India, the industry’s revenue reduced 32 percent between April-June 2016 and April-June 2018, and it is expected that the revenue in 2018-19 will be lower than that of the revenue in 2013-14 at Rs 1.45 lakh crore. “Since the industry’s revenues have declined substantially, the output GST on revenue is unable to absorb input GST credits available. Such a situation has led to blocking of approximately Rs 35,000 crore of operator’s capital in the form of excess GST credits,” said Mathews. The levy of GST on a reverse-charge basis on both spectrum pay out and LF, and SUC-related payments are leading to a cascading cash-flow impact requiring payment of GST, which cannot be set off against a corresponding GST liability.