It has been a tough few months for incumbent telecom operators in India. Reliance Jio's entry into the market brought a massive transformation that led to an intense price war. From free 4G data giveaway to affordable mobile internet and voice call bills, Jio forced other telcos to match the new benchmarks or stand to lose big.
Airtel, Vodafone, Idea, BSNL and other telcos have come up with new offers and plans to match that of Reliance Jio for a price. But those offers did not stop Jio from becoming the world's fastest growing company. Just when the telcos are finding successful means to keep up with their rivals, the goods and services tax (GST) is taking a toll on the competition.
On July 1, GST was implemented to eliminate various state taxes with Prime Minister Narendra Modi's vision of 'One Nation, One Market, One Tax.' The tax rates under GST range between 3 percent and 28 percent, depending on the goods. While taxes on some products and services have been reduced, GST has increased tax rates on some.
The GST Council has placed telecom services under the 18 percent slab, which is 3 percent higher than the previous 15 percent slab. This has raised concerns amid a serious competition that has been affecting the industry's revenue. Now, increase in tax rates will affect both postpaid and prepaid users.
For instance, if your postpaid usage is Rs. 500 in a month, taxes will bump the total bill amount to Rs. 575. However, the GST rule will require you to pay Rs. 590, which is Rs. 15 more than your previous bill.
Similarly, prepaid users recharging for a talk time would get 3 percent lesser than what they used to before GST regime. For instance, a Rs. 100 top-up would fetch about Rs. 83 talk time before GST, but users will get Rs. 80 post-GST now.
The 3 percent hike will be applied on all telecom services, but it is possible the telcos might dissolve the taxes on certain packages such as full talk time or select data packs.
"Today it (industry) is saddled with an unprecedented debt of more than Rs 4.5 lakh crore, with revenues of less than Rs 2 lakh crore... we are hopeful that the government will... revise the current rate of 18 percent, which is fairly high to the requested rate of 5 percent," Cellular Operators' Association of India Director General, Rajan S Mathews told PTI.
