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GST should not increase
October, 12th 2009

The three major Telecom Associations of India namely, COAI (Cellular Operators Association of India), ICA (Indian Cellular Association) and AUSPI (Association of Unified Telecom Service Providers of India) have joined hands together to engage with the Ministry of Finance, the Ministry of Communication and Information Technology, and the Empowered Committee of State Finance Ministers on the proposed Goods and Services Tax (GST) regime intended to be introduced with effect from April 1, 2010.

In a joint submission to the Ministry of Finance, the Industry Associations have drawn attention to the role of telecom in accelerating economic growth. Reference was made to a recent India specific study released by Indian Council for Research on International Economic Relations (ICREIR), which states that a 10% increase in mobile penetration delivers on an average 1.2% increase in output. The three Industry Associations have thus urged that the new dispensation /regime should be such that it continues to facilitate an aggressive growth of the telecom sector and use of mobile by the common man not only to increase his income and productivity, but also in fact, enhance his quality of life.

Accordingly the industry associations have requested the Government that under the proposed GST regime:

Telecom Services

1.The tax incidence on Telecom Services should NOT be increased.

2.Telecom Services (including right to use transactions) should be subject to only Central GST.

3.Telecom services providers should be entitled to refund of the all unutilised input credits.

This would be the most appropriate dispensation to promote speedy growth of affordable communication service in the country, which is the need of the hour, especially in the rural areas.

Mobile Handsets

4.The zero duty policy on mobile handsets has been introduced after a great deal of thought in order to curb the grey market and enhance economic growth. The Information Technology (IT) Agreement and WTO to which India is a signatory, requires zero customs duty on imports. This fact puts a limit on domestic taxes on the product.

5.Accordingly, Mobile Handsets should be exempted from Central GST (as at present Excise Duty is not levied on manufacture of mobiles) and State GST should be levied at a lower rate of 4% so that the present tax incidence on the mobile handsets does NOT increase.

Lower price of mobile handsets is crucial for lowering the entry barrier and stepping up the mobile penetration rate. Also, each mobile phone delivers a regular stream of benefits to the consumer and the exchequer by way of telecom service and the corresponding service tax. 

The Associations believe that addressal of the above two major areas of concern under the proposed GST regime will go a long way towards facilitating the continued aggressive growth of affordable telecom service in the country.

The Associations are also planning to submit a detailed white paper listing out the other concerns of the industry as well.

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