Impact of GST on Telecom Sector

By Registrationwala

14th April 2017


The launch of Reliance free 4G Jio voice and data calls service a few months prior to GST implementation and other telecom companies also aping the same scheme for customers in modified form, the connection between GST and telecom sector has invited unwarranted attention now.

Experts feel that GST (Goods and Service Tax) has the potential to add up to 2 per cent weightage to India’s GDP. It aims to simplify the otherwise complex and onerous Indian taxation system. If implemented properly, GST will encourage self-employment in India to an immense level.

GST, Telecom Sector and Petroleum Products

Telecom is one of the nation’s booming sectors. Currently, India comes third in the rank of leading telecom service users in the world after the US and China. Under GST procedure, a telecom company would just need to file a single return instead of 2-3 files returns in a year under various state tax heads.

The use of uninterrupted power supply in the telecom sector is extremely crucial for the effective functioning of the sector. If petroleum sector is kept within the ambit of GST then it will be good for the nation. GST will expedite the entire tax process and will help the petroleum firms from paying a single unified tax instead of multiple taxes. But it’s not that simple. The picture is still not clear whether the government will apply GST on both Petroleum and Telecom sector or not.

Why GST Impact On Telecom Sector Could Be Huge?

Telecom sector is regulated by the TRAI (Telecom Regulatory Authority of India), a nodal central government agency looking into the telecom services in the country. All telecom licenses are required to be granted by the DoT (Department of Telecommunications).

Usually, Telcos get their circle-wise licenses from DoT. However, for international long distance calls or ISD, permissions are sought on a nation-wide basis. One circle may cover several states and hence accounting should also be on the circle-wise level. But under GST, the entire taxation process has to stay unified. Therefore in its existing form the GST is impossible for telecom sector. A massive technological modification in the IT and accounting systems would be required to alter the existing state-wise accounting process to a national level.

Problems of GST Calculations in Telecom Sector

Identifying the place of supply is crucial for GST. Usually, the place of supply is deemed to be the location of dealers who do easy/ online mobile recharges. The presence of a massive distribution chain makes it extremely difficult to identify where payment has been received for the e-top ups.

Suppose a telco receives INR 100 at Kolkata circle for a recharge done by a retailer based at Patna. This could be ambiguous to calculate under GST taxation procedure. The best way forward is to consider the mobile customer’s address as the place of supply. It must be taxed accordingly. Thus, GST may create a ruckus in the existing taxation process in the Telecom sector, if applied in its existing form.


Impact of GST on Telecom Sector