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DoT suggests slashing GST rate on telecom services from 18% to 12%

December 28, 2017

The Department of Telecommunications (DoT) has suggested that the finance ministry should consider reducing the goods and services tax (GST) for telecom services to 12 per cent from existing 18 per cent.

The recommendation was made during the process of the budget exercise for the financial year 2018-19 and the matter is with the Department of Revenue under Ministry of Finance for necessary action.

DoT pointed that Telecom Regulatory Authority of India (TRAI) had previously favoured reduction in licence fee and Universal Service Obligation levy, cut in spectrum usage charges (SUC) and relaxation in spectrum payout terms citing debt burden on telecom companies. TRAI also found merit in demand of operators pertaining to reduction in GST rate as well as treating telecom sector as core infrastructure sector.

Meanwhile, DoT stated that the inter-ministerial group (IMG) that was tasked to review the financial difficulties of the sector was of the view that while there were some companies under the financial stress, the entire sector could not be described as being in financial difficulty. This is because debt, capital structure and cash flows and hence repayment capability varied from company to company.

Further, the IMG report has recommended giving one-time opportunity to operators to opt for 16 installments instead of the current 10 for payment of spectrum. The group has also proposed amendment to spectrum trading guidelines, stating that the DoT should issue clarification that only profit from spectrum trade will form part of revenue for the purpose of calculation of adjusted gross revenue (AGR). It has also suggested that approach to fixing reserve price for spectrum should be reviewed in sync with global best practices.


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