Telephone bills are set to pinch more as telecom companies are likely to pass on to subscribers the burden of the higher service tax of 14 per cent proposed in the budget.
Finance Minister Arun Jaitley, in his budget proposals, increased the service tax rate to 14 per cent from the current 12.36 per cent.
Mr. Jaitley said: “To facilitate a smooth transition to levy of tax on services by the Centre and the States, it is proposed to increase the present rate of service tax plus education cesses from 12.36 per cent to a consolidated rate of 14 per cent.”
Reacting to the development, the Cellular Operators Association of India said bills would be expensive by half a per cent as burden had to be passed on to the end-user.
“The bills will be expensive by half a per cent from the present ... because it’s a tax and has to be passed on to, and collected from, the end-user so it makes the overall bill more expensive for the consumer,” COAI director-general Rajan S. Mathews said.
The increase in service tax “is a negative” and made the services more expensive, he said.
“The enabling provisions for levy of a Swatchh Bharat cess have been introduced, which shall be treated as service tax. In case Cenvat credit is not allowed, the suggested cess at 2 per cent would increase the effective service tax rate to 16 per cent; which will be a huge cost for the telecom industry,” he said.
Consultant PwC India said the increase in service tax rates would make telecom services more expensive for customers. “This is likely to dilute the positive impact of reduction of tariff charges proposed by TRAI,” PwC India partner (indirect tax) Amit Bhagat said.
Commenting on the overall budget, Mr. Mathews said the telecom industry’s issues had not been addressed.
“While a few proposals in the budget may help growth of telecom and broadband, overall, the industry’s concerns and submissions have been left unanswered. With the government’s thrust on the Digital India initiative, a more supportive budget was expected for the telecom sector,” he added.
COAI said the silver lining in the budgetary proposal for the sector was the linking Jan Dhan programme, Aadhaar and Mobile telephony. — PTI