Battered telecom sector may soon see a GST rate cut

Amid mounting woes of telecommunication companies and their falling revenues, the GST Council may cut rate on telecom services to 12% from the existing 18%.

The proposal is under consideration of the fitment committee of the GST Council, which may decide on reducing the levy considering that the sector pays around 30% of its earnings in taxes and other fees, including spectrum usage charge.

The debt-laden telecom companies have sought relief from the government. The issue has come up for reconsideration after once India's third-largest telecom service provider Vodafone Idea posted the worst quarterly loss of Rs 50,922 crore, the biggest in India's corporate history.

This came after the late last month the Supreme Court upheld the government’s broader definition of telecom firms’ revenue on which tax is levied.

After the ruling, the operators became liable to pay tax on their non-core revenues—adjusted gross revenues (AGR), over and above the spectrum usage charges and licence fees.

It resulted in a Rs 92,000 crore liability for India’s telecom sector, Airtel, the second-largest telecom service provider and Vodafone Idea were the worst hit.

Days after the Supreme Court ruling, the government had set up a Committee of Secretaries (CoS) under the Cabinet Secretary to suggest measures to mitigate financial stress in the sector.

Finance Minister Nirmala Sitharaman has said that the government is yet to take a decision on including the dues arising out of the Supreme Court judgement into its own accounts, signalling the government was not in a hurry to collect the dues from the sector at a time when its losses were mounting.