Phone bills set to rise as service tax hike could be passed on

With service tax set to rise from 10 to 12 per cent, telecom companies today said tariffs for all telecom services will rise from the date the hike in tax is notified.

"We are very disappointed with increase in service tax. Industry has been under attack for raising (tariff) but this time government itself has raised service tax which will take phone service charges up," GSM industry body COAI's Director General Rajan S Mathews told PTI.

He said that service tax is passed on to consumers and it is revenue for government, and not for the companies.

"The rise in Service Tax from 10 per cent to 12 per cent will increase cost of services to customers and also impact the P&L (Profit and Loss) of telecom companies. As a highly taxed industry, this will certainly have a further impact on the consumer," Bharti Airtel CEO for India and South Asia Sanjay Kapoor said.

Telecom service provider MTS India said that the increase in service tax is going to mainly hit CDMA customers as most of them belong to low-income group.

"Increase in service tax from 10 per cent to 12 per cent would increase cost of ownership of a mobile phone. This becomes all the more significant for CDMA based mobile services which to a large extent services the telecom needs of customers who are at the bottom of the pyramid," MTS India President and CEO Vsevolod Rozanov said.

Mathews said that the increase in service tax is against proposal made in new National Telecom Policy, which talks about rationalising taxes and levies affecting the sector to make services more affordable.