IBS Hyderabad

Academic Year 2020-2022

Goods and Services Tax (GST)
Semester II
Faculty: Miss. Padmavathi C.

“Report on study of GST from Industry Perspective focusing on

Telecom Industry”

Prepared By: “Group M”

Name Enroll. No. Seat No. Section
GURRAM GNANA KOUSIK 20BSPHH01C0455 64 C
SAI SLOKA REDDY DEVELLA 20BSPHH01C1058 65 C
AZEEM AHMED MUNAFF 20BSPHH01C0280 66 C
GANESH JADHAV 20BSPHH01C0424 67 C
OMKAR NATH CHAURASIA 20BSPHH01C0814 68 C
GOMATHINAYAGAM P 20BSPHH01C0443 69 C

Submitted On:
18th December 2020
 ACKNOWLEDGEMENT
We are overwhelmed in all humbleness and gratefulness to acknowledge our
depth to all those who have helped us to put these ideas, well above the level of
simplicity and into something concrete.

We would like to express our special thanks of gratitude to our faculty Prof. C.
Padmavathi who gave us the golden opportunity to do this wonderful project on
the topic “Study of GST from Industry Perspective focusing on Telecom
Industry”, which also helped us in doing a lot of Research and we came to know
about so many new things.
 INDEX
1. INTRODUCTION TO GST ...................................................................... 01

2. ABOUT THE TELECOM INDUSTRY ................................................... 05

3. TAX STRUCTURE – (PRE-GST) ............................................................ 07

4. IMPACT OF GST IN TELECOM SECTOR (POST GST) ................... 09

5. TIME, PLACE AND VALUE OF SUPPLY ............................................ 12

6. ISSUES AND CONCERNS OF THE SECTOR GST............................. 13

8. INSIGHTS FROM INDUSTRY ................................................................ 14

JIO ...............................................................................................................

VODAFONE IDEA ...................................................................................

AIRTEL ......................................................................................................

BSNL ...........................................................................................................

9. REFERANCES…………………………………………………………….34
 INTRODUCTION TO GST

GST is known as the Goods and Services Tax. Goods and Services Tax Law in
India is a comprehensive, multi-stage, destination-based tax that is levied on
every value addition. GST is a single domestic indirect tax law for the entire
country.

• Indirect taxes

In the earlier indirect tax system, there were many indirect taxes levied by both
the state and the middle. The States have increased taxes, primarily in the form
of a value added tax (VAT). Each state has a different set of rules and laws.
Inter-state purchases of goods have been taxed by the centre. CST (Central State
Tax) is applicable in the case of the inter-state sale of goods.

The following is the list of indirect taxes in the pre-GST regime:

o Central Excise Duty

o Duties of Excise
o Additional Duties of Excise
o Additional Duties of Customs
o Special Additional Duty of Customs
o Cess
o State VAT
o Central Sales Tax
o Purchase Tax
o Luxury Tax
o Entertainment Tax
o Entry Tax
o Taxes on advertisements
o Taxes on lotteries, betting, and gambling
• Basic Definitions

Basic Definitions under Section 2 of the act contains 109 definitions. Few
important definitions are covered as under:

o Business: The definition of Business is an inclusive definition and covers

various spheres of transactions including the services. It includes any trade,
commerce, manufacture, profession, vocation or any other similar activity,
whether or not it is for a pecuniary benefit. Further, it includes any transactions
without considering the volume, frequency, continuity or regularity of such
transaction.
o Consideration: It includes the payment made or to be made in money or
otherwise for supply of goods or services. It includes the monetary value of any
act or forbearance in respect of or in response to inducement of the supply of
goods and services.
o Goods: It includes every kind of moveable property other than actionable claims
and money. It also includes securities, growing crops, grass and things attached
or forming part of the land.
o Services: It means anything other than goods. It includes actionable claims and
intangible property but not money.

GST Rates on supply of Goods - nil; 0.25%; 3%.5%; 12%; 18% and 28%.

GST Rates on supply of services – 18% exceptions 5%; 12% and 28%

• Components of GST

There are three assessments material under this framework: CGST, SGST and
IGST.

CGST: It is the assessment gathered by the Central Government on an intra-state

deal (e.g., an exchange occurring inside Maharashtra)
 SGST: It is the assessment gathered by the state government on an intra-state
deal (e.g., an exchange occurring inside Maharashtra)

IGST: It is an assessment gathered by the Central Government for a between state

deal (e.g., Maharashtra to Tamil Nadu)

• Advantages of GST

The cascading impact on the selling of products and services has primarily been
eliminated by GST. The cost of products has been impacted by the elimination of
the cascading effect. As the

levy on taxes is eliminated by the GST regime, the cost of goods decreases. With
this the treatment for e-commerce operations was described.

GST is also largely technologically oriented, too. All operations such as

registration, return filing, refund request and notice response need to be
performed electronically on the GST portal, which speeds up the processes.

• New in GST

Several new systems have been implemented by the GST regime along with it.

• Bills on e-Way

The implementation of "E-way bills" by GST implemented a centralized system

of waybills. This scheme was launched for inter-state movement of goods on 1
April 2018 and for intra-state movement of goods in a phased manner on 15 April
2018.

Under the e-way bill scheme, manufacturers, traders and carriers can easily
produce e-way bills for goods transported on a common portal from the place of
origin to their destination. Tax authorities also benefit from this scheme, which
reduces check-post time and helps to minimize tax evasion.
• E-invoicing

The e-invoicing system was recently launched on a trial basis, beginning in

January 2020 and running from October 2020 onwards. To comply with certain
criteria, this framework includes large corporations with an annual gross turnover
of more than Rs.100 crore.
 ABOUT THE TELECOM INDUSTRY

India is the world’s second-largest telecommunications market with a subscriber

base of 1.16 billion and has registered strong growth in the last decade..
According to a study prepared by the GSM Association (GSMA) in partnership
with the Boston Consulting Company, the Indian mobile economy is growing
rapidly and would contribute significantly to India's Gross Domestic Product
(GDP) (BCG). In 2019, in terms of the number of app downloads, India exceeded
the US to become the second largest market.

The government of India's liberal and reformist policies have been instrumental
in the rapid growth of the Indian telecommunications market, along with high
customer demand. The government has allowed easy market access to
telecommunications equipment and a fair and constructive regulatory system to
ensure that telecommunications services are accessible to customers at reasonable
rates. The deregulation of Foreign Direct Investment (FDI) requirements has
made the industry one of the country's fastest growing and the top five generators
of employment opportunities.

In terms of total internet usage, India ranks as the second largest market
worldwide. At a CAGR of 21.36 percent, the number of internet subscribers in
the country increased from FY16 to FY20 to cross 743.19 million in FY20. Total
wireless data use in India increased quarterly by 9.35 percent to cross 22,854,131
TB in Q4 FY20. Total telephone user base and tele-density in FY20 reached
1,177.97 million and 87.37 percent respectively.

At the end of 2019, Reliance Jio had the largest share of subscribers, at around
32 percent, in the wireless network market in India. During the same time span,
the firm had over 371 million subscribers followed by Vodafone idea, Bharti
Airel, BSNL and MTNL,etc.
 TAX STRUCTURE – (PRE-GST)

The Indian telecommunications industry accounts for 6.5 percent of GDP and is
an important sector of the economy. After the introduction of GST in 2017, it has
undergone considerable turmoil. Telecom operators paid service tax of 15 percent
before GST, which has now risen to 18 percent. In addition to the rising tax
burden, new compliance has contributed to the operators' woes. Let us take a
closer look at these impacts and the need for more changes for telecom operators.

In addition to the regular tax rate, telecom operators also pay GST on the levies.
This include spectrum fees, licensing fees, use of spectrum, etc. Operators pay
about 30 percent of their income in taxes when combined.

Until GST implemented Telecom service providers were not required to comply
with a statutory audit requirement' in compliance with the 1994 Finance Act (as
amended). However the service tax department was definitely responsible for
'audit scrutiny' if the service provider was listed as the preferred assessment for
audit purposes.

Before GST, Telecom firms select agents and dealers to sell and recharge coupon
coupons for SIM cards. As per Notification Sr., these agents/distributors are
exempted from service tax. No. 29(f) of Notice No. 25/2012-ST. However,
similar exemptions may or may not be available under GST for distributors.

Telecom firms normally incur high total service costs that are incurred by the
Head Office (HO) at the first point of contact, such as promotional expenses, legal
costs, etc. Via the Input Service Distributor Scheme (ISD) under service tax, the
input credit used for the above is then divided across revenue centers. However
an ISD scheme (or any equivalent) is still unheard of under the GST system,
primarily due to the remote practical possibility of dividing the State Tax Pool
(SGST) across other states.
Telecom companies have also evolved tenfold in order to optimize their customer
service. From mere communication services, they have grown to include complex
services such as value-added services, internet services, advertising services, etc.
Via Rule 3 of the Place of Provision of Service Law, the telecom service provider
and service receiver are in India, services will accrue to the place of service
receiver; but given its central existence, the complexities of chargeability were
not considered in detail.

There is a contradiction, wherein certain state VAT legislations (e.g. Andhra

Pradesh, Goa, Gujarat, etc.) have specifically included SIM cards in the VAT
schedules. So it is not clear whether sale of SIM cards is a sale of goods or
provision of service.

To replace the current indirect tax-related clauses under the agreement with
different suppliers, consumers, etc., a new GST clause considering the proposed
GST will have to be established. Companies may consider re-evaluating
alternative business models for undertaking operations in view of the possible
consequences of the proposed GST legislation.
 IMPACT OF GST ON TELECOM INDUSTRY

BENEFITS OF GST ON TELECOM SECTOR

One of the major advantages that GST provides the telecom sector is that it allows
telecommunication enterprises to avail input tax credit on purchase of goods and
adjust it against output GST liability, which under previous tax schemes was not
allowed. The telecom industry is a capital-intensive industry with major portion
of costs being incurred for the acquisition of infrastructure facilities like towers
and telecommunication equipment.

The VAT applicable on such equipment was not available as input tax credit
against the service tax payable on services provided by telecom operators.
Therefore, with the multiplicity of taxes such as VAT and service taxes being
eliminated, the telecommunication sector has a huge advantage. Since full input
tax credit is proposed in GST, there is a possibility of reduction in cost of
procurements.

NEGATIVE IMPACTS OF GST ON THE TELECOM SECTOR

• Increased Tax Burden

The implementation of GST sees the slab rate increase from 15% to 18% this
increases the overall cost to telecommunication service providers, which will
ultimately be passed on to the customer. In addition to this, the tax rate on
domestic mobile manufacturers has been increased from 6% to 12% making

locally manufactured mobile handsets costlier than imported ones, since the tax
rate for imported handsets has been brought down from 18 – 27% down to 12%.
This adversely affects the Make in India scheme, which contributed almost 80%
of locally assembled phones.

• Mandatory Audit:
 Prior to the implementation of GST, it was not compulsory for the
telecommunication enterprises to conduct mandatory audit but after the
implementation of GST, there are mandatory audit provisions that must be
complied with. This will result in an increase in the regulatory compliance costs
because of the management requirements because of the dual engagement with
tax firms as well as management service providers.

• Circle Vs. State:

As per the GST regulations, it is necessary to determine the place of supply, and
for this purpose the recipient’s address is made as the basis for determining the
place of supply. The duty of maintaining properly updated databases on a real
time basis is necessary.

Additionally, telecom enterprises which had maintained circle wise accounts to

account for license charges and fees now with the introduction of GST, are
required to apportion the costs and fees based on state wise records. This raises
complications because while India has 29 states and seven union territories, there
are only 22 telecom circles. Many circles cover more than one state and union
territory. For example, the Delhi circle includes Delhi, Ghaziabad, Faridabad,
Noida, and Gurgaon, covering three states.

While the service tax collected from the Delhi circle goes directly to the central
government. But since GST has two components - CGST (central GST) and
SGST (state GST) - the tax collected from service providers will be divided
between the central and state governments. That will mean increased paperwork.
Telcom companies will have to segregate revenues emanating from each state. It
will have compliance and data collection-related cost implications for the telecom
companies.
• Recharge Coupons:

The non-uniformity of GST rates across states is has a direct bearing on the
pricing of services. Since GST is a destination-based tax, the recharge coupons
which are used by customers vary across states. For example, if the Maximum
Retail Price of a recharge coupon is Rs 100 and the GST rate is 20 percent in
Delhi and 25 percent in Haryana.

The talk-time offered would be Rs 83.30 and Rs 80 in Delhi and Haryana

respectively. In the absence of a uniform GST, the parity in pricing recharge
coupons for prepaid customers across states, will be a concern. Thus, it is
imperative to have uniform rate of Central GST, State-GST and Inter-state GST
for telecom services across States/ Union Territories.
 PLACE OF SUPPLY UNDER GST OF SPECIFIC SERVICES

1. Services provided using fixed telecommunication line, leased circuits, internet

leased circuits, cable or dish antenna.

The place of supply will be location where the telecommunication line, leased
circuit, cable connection or dish antenna is installed.

2. Post-paid mobile connection.

The place of supply will be Billing address of the recipient on the records of the
supplier.

3. Prepaid mobile connection.

The place of supply will be when supplied by a selling agent/re-seller/distributor

of the supplier: Address of the selling agent /re-seller/distributor as per the
records of the supplier at the time of supply.

4. Where the leased circuit is installed in more than one State or UT and a
consolidated amount is charged for supply of services relating to such circuit.

The place of supply will be all the States involved will be considered as place of
supplies in proportion to the value for services separately collected or determined
in terms of the contract or agreement entered into in this regard.
 ISSUES FACED BY TELECOMMUNICATION SECTOR IN
GST REGIME

Exclusion of petroleum products.

The GST on petroleum products has been deferred. The petroleum products are
the necessity of the telecommunication industry to maintain round-the-clock
uninterrupted supply of services, the telecommunication towers run on diesel
i.e., DG sets, electricity and lithium cell batteries. At present, the Central Excise
duty and the VAT are charged on the sale of petroleum products. Hence, this
results in huge cascading effect on the telecom sector.

1. Non-availability of ITC on telecommunication towers.

As per Section 17(5)(c) of the CGST Act, 2017, the ITC of the works contract
services when supplied for construction of an immovable property (other than
plant and machinery) is not allowed. Further, Section 17(5)(d) also denies the ITC
of goods or services used for construction of an immovable property (other than
plant or machinery), even if such goods or services are used in the course or
furtherance of business. The term ‘Plant & Machinery’ excludes the
telecommunication towers as per the Explanation to Section 17(5) of the CGST
Act, 2017 for the purpose of ITC. Therefore, the telecommunication towers shall
be treated as the immovable property.

2. Sale of SIM

Whether to be considered as goods or services? - The crux of the various Judicial

Rulings in the earlier regime is that the amount received towards SIM cards will
be leviable to service tax as the SIM cards on their own, without the services,
would have a negligible value. However, there is a contradiction from certain
States as they have included the SIM cards in their VAT schedules. So, it is not
clear whether it is to be treated as goods or services.
 INSIGHTS FROM INDUSTRY
A) COMPANY – JIO

▪ Reliance Jio Info COMM Limited, Jio, is an

Indian telecommunications company and wholly owned subsidiary of Reliance
Industries, headquartered in Mumbai, Maharashtra, India.
▪ It operates a national LTE network with coverage across all 22 telecom circles.
▪ It does not offer 2G or 3G service, and instead uses only voice over LTE to
provide voice service on its 4G network.
▪ Jio soft launched on 27 December 2015 with a beta for partners and
employees, and became publicly available on 5 September 2016.
▪ Jio becomes India's biggest telecom company; Vodaphone, Idea user base dips to
320 million.
▪ According to the financial results reported by Reliance Industries NSE -0.68 %
last week, its subsidiary Reliance Jio had a user base of 331.3 million by June
2019.
▪ Jio becomes India's biggest telecom company; Vodaphone, Idea user base dips to
320 million.
▪ Mukesh Ambani-led firm Jio had pipped Bharti Airlines 0.26 % in May to
become the second largest mobile operator with 322.9 million users and 27.80
 per cent market, according to Trai data. Airtel had 320.38 users or 27.6 per cent
market share.

JIO GST

▪ Since Reliance is one of the GST Suvidha Providers (GSPs) appointed by Govt.
of India, it has launched JioGST to facilitate and ease the process of
generating GST returns for merchants and retailers.
▪ All you need to do is visit - Simple Secure GST Compliance and register yourself
as a tax payer.
▪ JioGST offers simple & secure GST Compliance Solutions - GST Billing &
Accounting software for businesses, tax practitioners and tax payers.
▪ The JioGST starter kit comes at the price of Rs 1,999. Reliance claims to have
offered benefits of Rs 10,884 in the starter kit.
▪ After the rollout of GST from July 1, the businesses need GSTIN number to file
taxes and returns. The Jio kit will help them file their GST.
▪ Through its app, businesses can even find JioGST-empanelled tax practitioners
and can authorise them for filing returns.
▪ Goods and Services Tax (GST), Reliance Jio has come out with JioFi JioGST
starter kit and Jio GST billing app.
▪ The Reliance Jio starter kit includes JioGST software solution for one-year,
unlimited voice calls, 24 GB Data for one year, JioFi Device and GST billing app

Impact of GST:

The introduction of GST was the biggest tax reform that India has ever undergone
since its independence. And even though almost 2 years have passed since its
implementation in July of 2017, it is still somewhat of a novelty. To put it simply,
the Goods and Service Tax or GST as it is more commonly known is a
comprehensive indirect, multistage, destination-based tax imposed on the supply
of Goods and Services. For the purpose of tax collection goods and services are
divided into five slab rates viz., 0%, 5%, 12%, 18% and 28%.

Although on a positive note, GST is expected to divide the tax burden

equally between manufacturers of goods and service providers, build a corruption
free, transparent government, promote exports, increase the rate of employment
and boost the economic growth of the country, there are still a number of draw
backs such as increased cost of tax compliance, and other operational costs, which
will ultimately prove to be a higher tax burden to the Micro, Small and Medium
Enterprises ( MSME) and since the MSME sector is a major contributing factor
towards the development of the economy, this is a significant drawback.

With the service sector contributing more than 50% of the GDP, and also
playing a major role in providing employment opportunities to both skilled and
unskilled workers, it is important to note that prior to the implementation of GST,
out of the 12,76,861-service tax assesses (as on March 2014), only the top 50
contributed towards 50% of the tax collected across the nation. Therefore, this
unified tax system, which reduces the chances of tax evasion, will increase the
collection of tax by widening the taxpayer database thereby, allowing the GDP to
increase. Additionally, with the service sector contributing to almost 66.1% of
Grass Value Added, it is also the most attractive source of attracting Foreign
Direct Investment.

The impact of GST is slightly different for each industry. As far as the
telecom sector is concerned, GST will help to reduce manufacturing costs as a
result of inventory management through consolidation of warehouses and since
GST has nullified the need to set up state specific entities and transfer stock,
handset manufacturers will save a major portion of logistics costs.
 IMPACT OF GST ON JIO:

Dependence Jio had actualized a GST consistence starter pack for retailers to
execute the new tax collection framework from July 1, 2018. From July 1, 2018,
all the cell phone clients should shield out additional for their cell phone use on
the impact of GST.

• GST Effect on Jio Fiber

• GST Effect on Jio DTH

• GST Effect on Jio 4G Phone

GST EFFECT ON JIO FIBER | JIO BROADBAND:

The Goods and Services Tax (GST) Council has given telecom benefits under the
18 percent piece. Telecom administrations are presently burdened at 15%, and
3% will be reflected in current postpaid clients' bills. The answer for Jio GST is
intended to enable little retailers to move to GST. It will be useful to keep records,
document GST returns and give the item charge gadget.

• Jio Fiber Previous Tax Rate-15%

• Jio Fiber Latest Tax Rate-18%

GST EFFECT ON JIO DTH | JIO BROADBAND:

For the prepaid clients, the cash will be deducted in the discussion time. On the
off chance that the current postpaid bill is Rs. 500 for postpaid clients, at that
point you should pay the Rs. 575 bill sums. On the off chance that after the GST
influence the postpaid bill must be paid by the client Rs. 590. Here 3% will
expand the duty rate on their full talk time prepaid items.

• Jio DTH Previous Tax Rate-15%

• Jio DTH Latest Tax Rate-18%

 GST EFFECT ON JIO 4G PHONE:

For the Prepaid clients, typical talk time revive is of Rs 100, in which they get 85
Rs of talk time in the energize period. Presently after the GST influences the all-
out talking time that clients will get in the energize of 100 rs, 82Rs. Rs 3 is a
charge deducted. GST goes into power on 1 July and circuitous tax assessment
will deduct cash from focal and state charges, for example, extract administration
expense, and tank.

• Jio 4G Phone Previous Tax Rate-15%

• Jio 4G Phone Latest Tax Rate-18%

POST GST SCENARIO:

For propelling the Jio GST arrangement in India Jio has associated with the
Retailer Associations of India, Jio GST Solution is the little portable
programming. The cost of this product is Rs. 1999 and incorporates a one-year
membership to JIOGST programming arrangements, free voice calls, one-
year 24 GB of information and a Jio with Wi-Fi. From anyplace, little dealers and
retailers will profit by the JIO-GST programming.

• Before 1 July 2018 GST on Telecom Sector (Reliance Jio Prepaid and Post-paid
Bills)- 15%

• After 1 July 2018 GST on Telecom Sector (Reliance Jio Prepaid and Post-paid
Bills)- 18%

• The JioGST starter kit comes at the price of Rs 1,999. Reliance claims to have
offered benefits of Rs 10,884 in the starter kit.

• After the rollout of GST from July 1, the businesses need GSTIN number to file
taxes and returns. The Jio kit will help them file their GST. Through its app,
 businesses can even find JioGST-empanelled tax practitioners and can authorise
them for filing returns.

DOWNLOADING INVOICE USING JIO.COM

1. Login in to Jio.com through OTP.

2. Click on 'My Statement'
3. Specify the start and end dates, with the date range within 30 days.
4. Click 'View' to generate the statement. You can also download the same in PDF
format.
STEPS BELOW TO CREATE A GST BILL ON LEDGERS:

1. Step 1: Create Invoice.

2. Step 2: Select Invoice Date and Payment Due Date.
3. Step 3: Select Customer.
4. Step 4: Verify Place of Supply.
5. Step 5: Select the Goods or Services Supplied.
6. Step 6: Update Additional Information.
7. Step 7: Create GST Bill.
 B) COMPANY- VODAFONE_IDEA

Aditya Birla Group and Vodafone Group partnership has given rise to Vodafone
company. The Company provides all India Voice and Data services across 2G,
3G and 4G platforms. With the massive variety portfolio to support the growing
demand for data and voice, the corporate is committed to deliver delightful
customer experiences and contribute towards creating a very Digital India by
enabling many citizens to attach and build a far better tomorrow. The Company
is developing infrastructure to introduce newer and smarter technologies, making
both retail and enterprise customers future ready with innovative offerings,
conveniently accessible through an ecosystem of digital channels as well as
extensive on-ground presence. The Company is listed on National stock
market (NSE) and BSE in India.

Vodafone Idea Business Services is committed to being the foremost trusted and
valued partner helping businesses achieve a digital world. Our Total
Communications solutions empower global and Indian corporations, public
sector & government bodies, small & medium enterprises and start-ups.

From market-leading Enterprise Mobility, robust Connectivity and world-class

IoT Solutions, to superior Business Communication & Cloud and insightful
Business Analytics & Enabling Solutions, we bring the smartest and newest
technologies to serve businesses in the digital era.
Their global expertise and deep local knowledge makes us the preferred digital
enablement partner of enterprises across India. No matter which sector you use in
and no matter your size and scale, business is best once we are together.

The world of Vodafone Idea Limited, where millions of customers are at the heart
of everything that Vodafone does.

Vodafone use the facility of technology to reinforce their customers’ lives –

through ubiquitous presence and connectivity through their PAN India urban and
rural coverage, a continuously expanding 4G LTE network, integrated worry free
propositions and a few of the simplest entertainment on mobile, all packaged
into a totally unmatched customer experience.

Vodafone’s innovative and truly differentiated offerings – be it their Prepaid

Unlimited propositions, RED Postpaid plans, Truly Unlimited International
Roaming products and many others - reflect the passion with which they aim to
serve their customers, always!

Be the most valued company through smart leadership committed to delivering

sustainable growth, while adhering to the highest standards of governance and
compliance. Be the most respected company by leveraging technology and
purposeful innovation to catalyze social prosperity, digital literacy and
inclusivity.

Their values embody the spirit of their brand. They serve as the guiding principles
for their every thought and action.

IMPACT OF GST

From July 1st 2017 all the mobile phone users will have to shell out more for their
mobile phone usage. The GST council has put telecom services under the 18%
slab. Usually telecom industry operates under the 15% tax slab but introduction
of GST has increased it. Vodafone has clearly mentioned that the increased 3%
will reflect in the postpaid bills of the users. They will deduct the tax rate from
the talk time for the prepaid users.

PRE GST VODAFONE

Bill Amount Tax Rate Tax Amount Total Amount

1000 15% 150 1150/-

POST GST IMPLICATION

Bill Amount Tax Rate Tax Amount Total Amount

1000 18% 180 1180/-

Total amount of difference = 180 - 150 = 30/-

The company decided to absorb the 3% increase in tax rate on their full talk-time
prepaid products as well as on selected data package prepaid vouchers.

The scheme given was like if the prepaid users recharge for Rs 100 then the talk
time will be given for only 85/- this was the scenario before GST. After the
introduction of GST additional 3% that is the users recharge for 100/- then they
will get only 83/- talk time as the tax rate is increased to 18%. GST did have
cascading effect on telecom companies. GST came up at a time when tariffs for
data usage have fallen to an all-time low across the board whereas voice calls
now just free for Vodafone and for the majority of postpaid users of the telecom
industry. Due to already troubled inflicted by the jio revolution, the telecom
industry and all the major telecom companies expected some relief from the low
tax slab but the tax slab was increased.

GST regime had a negative impact on the telecom industry and especially
Vodafone. But some reports also suggested this tax rate increase might not be felt
in the telecom sector as the company might absorb that extra 3%. But Vodafone
has face completely opposite.

India not only has the second largest telecommunications market, having almost
1.20 billion subscribers, but with almost 604.21 million internet subscribers
its ranked because the country with the world’s second largest number of internet
subscribers as well. This clearly shows that the telecom sector provides not just a
basic service, but it also forms a neighborhood of the critical infrastructure of the
country and may be a core economic driver that has a wide outreach. With the
telecommunications sector being a mammoth sized industry, it is an absolute
necessity for the cost of consumption of telecommunication services to go down
in order to broaden the scope of the telecom business and achieve socio –
economic progress.

The Reliance’s Jio, which led to small players being forced to leave the market,
telecom operators have been pushed to absorb the additional costs incurred as a
result of 18% GST rate set as against the 15% paid previously. In addition to this
telecom operator are now compelled to bear the load of new compliance
procedures. With estimates showing that by 2025 India will emerge because
the country with the very best number of internet users, studying the impact of
GST of this sector has become the need of the hour. This paper aims at comparing
the telecom sector before and after the implementation of GST, understanding its
current day scenario and future scope for development
 C) COMPANY- AIRTEL

ABOUT COMPANY:

Bharti Airtel Limited, also known as Airtel, is an Indian

multinational telecommunications services company based in New Delhi, Delhi
NCT. It operates in 18 countries across South Asia and Africa, and also in
the Channel Islands. Airtel provides GSM, 3G, 4G LTE, 4G+ mobile services,
fixed line broadband and voice services depending upon the country of operation.
Airtel had also rolled out its VoLTE technology across all Indian telecom
circles. It is the second largest mobile network operator in India and the fourth
largest mobile network operator in the world with over 439.84 million
subscribers.[5] Airtel was named India's 2nd most valuable brand in the first ever
Brandz ranking by Millward Brown and WPP

Airtel is credited with pioneering the business strategy of outsourcing all of its
business operations except marketing, sales and finance and building the 'minutes
factory' model of low cost and high volumes. The strategy has since been adopted
by several operators. Airtel's equipment is provided and maintained
by Ericsson, Huawei, and Nokia Networks whereas IT support is provided
by Amdocs. The transmission towers are maintained by subsidiaries and joint
venture companies of Bharti including Bharti Infratel and Indus Towers in India.
Ericsson agreed for the first time to be paid by the minute for installation and
maintenance of their equipment rather than being paid up front, which allowed
Airtel to provide low call rates of ₹1 (1.4¢ US)/minute.
IMPACT OF GST ON AIRTEL

On the whole the Indian telecom sector contributes 6.5% to the GDP and is an
essential sector in the economy. It has witnessed significant upheaval since the
implementation of GST in 2017. Before GST, Airtel paid service tax of 15%,
which has now increased to 18%. Apart from the increased tax burden, new
compliances have added to the woes of operators. Let's consider these impacts in
detail and the need for further improvements for Airtel the telecom operators.

Apart from a standard tax rate Airtel pay GST on levies as well. These include
spectrum fee, license fee, spectrum usage etc. When combined, it pays nearly
30% of their revenue in taxes. Then the Airtel has requested for tax exemption on
these levies.

PRE GST-SCENARIO AIRTEL

Bharti Airtel had over 359 million customers across its operations at the end of
July 2016. Before GST, telecom operators paid service tax of 15%. Airtel has
clearly mentioned that the increased 3% will reflect in the postpaid bills of the
users. They will deduct the tax rate from the talk time for the prepaid users.

For example, here is an Airtel’s bill which was issued before July 1st 2017, i.e.,
before GST implementation. The customer has the plan of rupees 500 but the tax
which was implemented before GST was 15% and so the tax would come to
rupees 75 which resulted in the bill of rupees 575, which the customer needs to
pay.

Bill Amount Tax Rate Tax Amount Total Amount

500 15% 75 575/-

 POST GST SCENARIO AIRTEL

• Here is an example of Airtel’s bill which was issued after GST implementation.

• Here the total bill that the customer needs to pay was 1178.82 in which the actual
monthly bill was 999 in which the GST was 18% which made the tax as 179.82,
resulted in 1178.82.

AIRTEL GST ADVANTAGE – A THREE-PRONGED OFFERING FOR

CUSTOMERS

1. Get free and secure access to the GST Network via Clear Tax:

Airtel has partnered with Clear Tax, India's largest tax filing platform, to enable
easy digital submission of returns by companies. With Airtel GST Advantage,
customers can access Clear Tax’s services free of charge. In other words, Clear
Tax’s GST software and platform will be available to Airtel customers without
the subscription fee. This access to Clear Tax is available till March 31st, 2018.
2. Get the best on-demand professional advice about GST:

All Airtel customers will have access to Airtel’s newly launched GST Advantage
Helpdesk between 8.00 am and 8.00 pm on all weekdays. The Helpdesk will be
managed by GST experts who will be available to advise Airtel customers on any
query relating to GST. Airtel has also published a GST knowledge bank
– developed by renowned tax experts. This knowledge bank will empower all
Airtel Business customers with an in-depth information about GST.

3. Additionally, preserve bandwidth while filing GST returns:

Airtel GST Advantage will also enable customers to upload their returns without
worrying about bandwidth charges. With GST Advantage, businesses will get
free additional data* with any Airtel corporate connection or device, to help them
file returns.
 D) COMPANY- BSNL

Bharat Sanchar Nigam Limited (BSNL) is an Indian state-owned

telecommunications company, headquartered in New Delhi, Delhi, India. It was
incorporated by Department of Telecommunications, Ministry of
Communications, Government of India on 1 October 2000. It provides mobile
voice and internet services through its nationwide telecommunications network
across India. It is the largest wireline telecommunications network company in
India with more than 60% market share and fourth largest wireless
telecommunications operator.

Bharat Sanchar Nigam Limited, is the India's oldest communication company and
its history can be traced back to the British India. The foundation of telecom
network in India was laid by the British sometime in 19th century. During the
British era, 1850; the first telegraph line, was established between Calcutta and
Diamond Harbour. The British East India Company started using the telegraph in
1851 and till 1854 telegraph lines were laid across the country. In 1854, the
telegraph service was opened to the public and the first telegram was sent from
Mumbai to Pune. In 1885, the Indian Telegraph Act was passed by the British
Imperial Legislative Council. After the bifurcation of Post and Telegraph
department in 1980s, The creation of Department of Telecom eventually led to
the emergence of the State owned telegraph and telephone company which led to
foundation of BSNL.

PRODUCTS & SERVICES

Telephone and Mobile

BSNL provides both fixed line telephones and mobile telephony services on
GSM and CDMA platforms.

BSNL Mobile - BSNL Mobile is a major provider of GSM network under brand
name CellOne all over India. It has wide network coverage in both urban and
rural areas of India. It has over 120.42 million customers across India. BSNL
Mobile offers prepaid, postpaid services and value-added services such as Free
Phone Service (FPH), India Telephone Card (Prepaid card), Account Card
Calling (ACC), Virtual Private Network (VPN), Tele-voting, Premium Rate
Service (PRM). It also offers the IPTV which enables customers to watch
television through the Internet and Voice and Video Over Internet Protocol
(VVoIP).

BSNL Landline - BSNL Landline was launched in early 1990s. It was the only
fixed-line telephone serving for whole country before the New Telecom Policy
was announced by Department of Telecom in 1999. Only the Government-owned
BSNL and MTNL were allowed to provide land-line phone services through
copper wire in India. BSNL Landline is the largest fixed-line telephony in India.
It has over 10.41 million customers and 49.34% market share in India.

Internet

BSNL is the fourth largest ISP in India, with having presence throughout the
country. It also has the largest fibre-based telecom network in India around 7.5
lakh kilometers among the four operators in the country.
BSNL Broadband - BSNL Broadband provides telecom services to enterprise
customers including MPLS, P2P and Internet leased lines. It provides fixedline
services and landline using CDMA technology and its own extensive optical fiber
network. BSNL provides Internet access services through dial-up connections as
prepaid, NetOne as Postpaid and DataOne as BSNL Broadband.

Bharat Fiber - Bharat Fiber (FTTH) was launched in February 2019. It offers
TV over IP (IPTV), Video On-Demand (VoD), Audio On-Demand (AoD),
Bandwidth On-Demand (BoD), Remote Education, Video Conferencing
Services, Interactive Gaming, Virtual Private LAN services. BSNL said that, its
huge optic fiber network provides fix access to deliver high speed internet ranging
from 256 kbit/s to 100 Mbit/s.

BSNL Wing Services - On 16 August 2018, Bharat Sanchar Nigam Limited has
launched "BSNL Wings Services" in 22 telecom circles. In which, there is no
need of SIM card or cable wiring as is a VoIP service through an app. It offers
unlimited free calling for one year throughout India.

IMPACT OF GST

From July 1st 2017 all the mobile phone users had to shell out more for their
mobile phone usage. The GST council put telecom services under the 18% slab.
Before telecom industry operated under the 15% tax slab but introduction of GST
increased it. BSNL has clearly mentioned that the increased 3% will reflect in the
postpaid bills of the users. They will deduct the tax rate from the talk time for the
prepaid users.

PRE GST BSNL

Bill Amount Tax Rate Tax Amount Total Amount

 500 15% 75 575

POST GST IMPLICATION

Bill Amount Tax Rate Tax Amount Total Amount

500 18% 90 590

Total amount of difference = 90 - 75 = 15/-

The company decided to absorb the 3% increase in tax rate on their full talk-time
prepaid products as well as on selected data package prepaid vouchers.

India's telecom industry has created nothing short of a revolution when it comes
to connecting the country. India had 1 billion active mobile connections in
January 2018 and as per a survey conducted by IMAI-Kantar IMRB, mobile
internet users are expected to reach 500 million by June 2018.

However, over the last few years, the industry has been hit with a double
whammy. First, the entry of Reliance's Jio led to a shakeout with several small
players exiting the business and a squeeze on operator margins. More recently,
the introduction of the Goods and Services Tax in 2017 led to collective groans
as the GST rate on the telecom industry was set at 18%, 3% more than the 15%
paid under the previous tax regime. While the headline rate is high, Central
Telecom Minister Manoj Sinha had stated that the tax rate after accounting for
input credits will be closer to 16%. BSNL has so far been compelled to absorb
the costs due to the aforementioned hypercompetitive conditions. The additional
 compliance load on the service providers is also quite extensive for BSNL to be
unenthusiastic about the new tax regime.

The Effect of GST on the Telecom Industry can be mainly classified under
additional monetary costs and compliance procedures.

MONETARY IMPACT

• Fuel not under GST

India's 75% of cell towers are still run on diesel. Diesel attracts taxes of ~100%
and hence is a huge component of the fuel costs. Since fuel has been kept outside
the ambit of GST, BSNL cannot set-off their tax liabilities against the taxes paid
on fuel.

• Liabilities due to Reverse Charge Mechanism (RCM)

As per the GST provisions on RCM, if a registered dealer purchases goods or

services of more then Rs 5,000 per day from an Unregistered Dealer (URD)
within the state, the registered dealer is liable to pay GST on behalf of the URD.
While this provision has been suspended up to 30th June 2018, if implemented,
it puts a substantial monetary and compliance cost on large registered dealers and
especially for BSNL as they regularly employ services of small dealers for the
maintenance of cell towers.

COMPLIANCE IMPACT

• Circle vs. State

BSNL is required to acquire licenses from the Department of Telecom for

providing various services. While International Long Distance (ILD) and
National Long Distance (NLD) licenses are provided on a pan-India basis, some
telephone licenses are provided on a circle basis. These circles may include
several states or parts of them. For example, Mumbai city is one circle while
Maharashtra & Goa (ex-Mumbai) is a separate circle. BSNL so far has maintained
circle-wise accounts to accurately account for license charges, fees, etc. To
comply with the GST tax filing rules, they have had to change their accounting
and apportion costs and fees.

FILING TAX RETURNS IN EVERY STATE OF OPERATIONS

Previously, BSNL had one central tax registration number and filed returns 2-3
times a year. However, under the GST norms, BSNL is required to obtain a GST
Registration Number for each of the states they have operations in and file 2-3
returns in every state per month.

DISPARITIES BETWEEN TRAI AND GST

There are some disparities in certain Trai provisions and the GST law. For
Example, if a prepaid customer buys a recharge card outside his 'home' circle, as
per GST, the service is deemed to be provided in the 'roaming' circle and should
be accounted there. However, as per the Telecom Regulatory Authority of India
(TRAI), the service should be recognized in the 'home' circle. This lack of clarity
in addition to the overlap in states and circles mentioned above is a messy tangle
to unravel.
 REFRENCES

1. https://cleartax.in/s/gst-analysis-and-opinions
2. https://www.profitbooks.net/place-of-supply-gst/
3. https://www.researchgate.net/publication/340163051_THE_IMPACT_OF_GST_ON_THE_T
ELECOM_SECTOR
4. https://www.bajajfinserv.in/insights/how-has-gst-impacted-the-telecom-
sector#:~:text=The%20Indian%20telecom%20sector%20contributes,has%20now%20increas
ed%20to%2018%25.&text=%2D%20GST%20allows%20for%20an%20input%20tax%20cre
dit
5. https://www.gstindia.com/gst-summary-of-the-model-gst-law/
6. https://www.ibef.org/industry/telecommunications.aspx
7. https://www.skpgroup.com/data/resource/skp_gst_impact_on_the_telecommunications_secto
r_in_india_.pdf
8. https://economictimes.indiatimes.com/news/company/corporate-trends/gst-and-mobile-
phone-bills-impact-on-post-paid-and-pre-paid-users/articleshow/59382097.cms
9. https://s3-ap-southeast-1.amazonaws.com/bsy/iportal/images/gst-faqs.pdf
10. https://en.wikipedia.org/wiki/Bharti_Airtel#:~:text=His%20plans%20were%20finally%20ap
proved,2%20million%20mobile%20subscriber%20mark.