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COAI Seeks GST Rate Cut Citing Sectoral Ill-Health

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Says input credit benefit not enough to fully compensate higher tax

The cellular operators have approached the government for a reduction in the 18% GST rate, saying the benefit of input credit is not enough to fully compensate the higher tax incidence in the new regime.

The telcos under industry body Cellular Operators Association of India (COAI) have emphasised that reduction in Goods and Services Tax or GST rate is important given that the industry is already suffering from “poor financial health.“

“...We request that the applicable GST rate for the telecom industry, which is already suffering from poor financial health, is reduced, so as not to increase the burden from the current levels,“ COAI has said in a letter to the Revenue Secretary. The letter comes just days before the meeting of the GST Council on June 11, in which the Centre and states will review demands by industries of lowering the proposed tax rates on certain goods and services.

The finance ministry has already indicated that a review is only possible where the proposed tax rate is ex orbitantly higher than the current levels.The letter by COAI Director General Rajan Mathews said the benefits on account of availability of credit of existing duties and taxes are not as perceived by the Finance Ministry. The notion that the increase in GST rate by 3% will get compensated by the reduction of cascading tax costs, is “misconceived“, the industry association said.

“While the increased burden of 3% will arise on the entire revenue, the benefit of input taxes will accrue only on procurement of capital equipments etc, which is a smaller percentage of the revenue,“ the COAI letter said. Hence, the benefit “will be minimal“, it added.

The apex industry body highlighted that a number of key inputs such as diesel and electricity that are consumed by the telecom firms continue to be outside the GST regime for which no credit is available.

The Economic Times New Delhi, 06th June 2017

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