1

REPORT ON
‘Telecommunication, broadcasting and information
supply services.
Submitted by: - Group 16
Submitted to: - Prof.Dr.T.Sita Ramaiah

SR NAME SEAT ENROLLMENT

NO NO NO

1 Shubham jaroli 76 21BSPHH01C1198

2 Itisha Agrawal 77 21BSPHH01C1772

3 Hari Prasath 78 21BSPHH01C0440

4 Muskan Agarwal 79 21BSPHH01C0712

5 S Abhishek 80 21BSPHH01C1002

Singh
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TABLE OF CONTENT: -

Sr.no Particulars Page no

1 Introduction 1-5

2 Place of supply 5-6

3 Information supply service 6-7

4 Registration process 7-8

5 Pre GST scenario 8-9

6 Post GST regime 9-10

7 Impact on telecom sector 11-15

8 Advantages and disadvantages 16

of GST

9 Conclusion 16

10 Reference 17
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Introduction to telecommunication
Before focusing our interest on telecommunication networks, it is important to take a brief look
at the history of telecommunications, referring to the most important steps that are at the basis
of modern transmissions of signals at distance. After more than 10 years of studies and
experimental implementations, Samuel Morse gave on 24 May 1844 a first public
demonstration of his telegraph using a wire from the Supreme Court Chamber in the Capitol
Building in Washington to Baltimore. Transmissions were of two single symbols (i.e., with
raised dots and dashes) suitably combined according to the Morse code. This simple act is at
the basis of the telecommunication age. Barely ten years later, telegraphy was available as a
service to the general public. In those days, however, telegraph lines did not cross-national
borders. Because each country used a different system, messages had to be transcribed,
translated and handed over at frontiers, then re-transmitted over the telegraph network of the
neighboring country. Since those dates, therefore,
the need emerged of a system with compatible rules across the national borders, that is an
international standard. Starting from 1850 many submarine cables were deployed for regional
links (telegraph transmissions) around the world. The first successful laying of an Atlantic
Ocean submarine cable for telegraph transmissions was completed in 1858 under the direction
of Cyrus West Field that arranged for Queen Victoria to send the first transatlantic message to
the US President James Buchanan. Unfortunately, the cable broke after just three weeks, and
Field did not complete his project until 1866. This was an important achievement for
telecommunications at great distances, the first wired connection for telecommunications
between America and Europe. The telegraph network has been the first worldwide-distributed
network for data transmissions. In 1876 Alexander Graham Bell demonstrated and patented the
telephone for voice transmissions at distance. However, the real inventor of the telephone has
to be considered Antonio Meucci who first realized that one could transmit voice via wire and
developed different models of telephone (he called "teletrophone"), although he was too poor
to protect his inventions with a patent

Introduction to broadcasting
Broadcasting is the distribution of audio or video content to a dispersed audience via any
electronic mass communications medium, but typically one using the electromagnetic
spectrum (radio waves), in a one-to-many model. Broadcasting began with AM radio, which
came into popular use around 1920 with the spread of vacuum tube radio transmitters and
receivers. Before this, all forms of electronic communication (early radio, telephone, and
telegraph) were one-to-one, with the message intended for a single recipient. The term
broadcasting evolved from its use as the agricultural method of sowing seeds in a field by
casting them broadly about. It was later adopted for describing the widespread distribution of
information by printed materials or by telegraph. Examples applying it to "one-to-many" radio
transmissions of an individual station to multiple listeners appeared as early as 1898. Over the
air broadcasting is usually associated with radio and television, though in recent years both
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radio and television transmissions have begun to be distributed by cable (cable television). The
receiving parties may include the general public or a relatively small subset; the point is that
anyone with the appropriate receiving technology and equipment (e.g., a radio or television
set) can receive the signal. The field of broadcasting includes both government managed
services such as public radio, community radio and public television, and private commercial
radio and commercial television. The U.S. Code of Federal Regulations, title 47, part 97 defines
"broadcasting" as "transmissions intended for reception by the general public, either direct or
relayed”. Private or two-way telecommunications transmissions do not qualify under this
definition. For example, amateur ("ham") and citizens band (CB) radio operators are not
allowed to broadcast. As defined, "transmitting" and "broadcasting" are not the same.
Transmission of radio and television programs from a radio or television station to home
receivers by radio waves is referred to as "over the air" (OTA) or terrestrial broadcasting and
in most countries requires a broadcasting license. Transmissions using a wire or cable, like
cable television (which also retransmits OTA stations with their consent), are also considered
broadcasts, but do not necessarily require a license (though in some countries, a license is
required). In the 2000s, transmissions of television and radio programs via streaming digital
technology have increasingly been referred to as broadcasting as well.

Introduction to information supply services

Our work in the Buddy project addresses the needs of industrial organisations, which are
continually faced with challenges to reduce information processing time, improve the added
and residual value of information, and reduce filtering, processing and distribution costs and
“lead-times”. In other words, Buddy deals with enhancement of the critical information supply
chains within these enterprises. The project deals with the information supply‐chain as an
important entity in itself, whose performance and optimisation can have very significant effects
on the efficiency and performance of industrial enterprises.

This is a major task, impacting profoundly upon the efficiency of much of industry and business
sectors and, as such, needs to be tackled on a broad front.

A conceptual modelling and simulation environment will be used for analysing information
supply‐chain management strategies, policies and decisions. A decomposable, “autonomous
agents” approach is proposed, aimed at specifying information supply chain models; models
will be defined in terms of constituent information supply chain “agents” (e.g. suppliers,
buyers, distributors, etc).

This includes their structural relationships, interaction “protocols” and co‐ordination policies.
It makes heavy use of models which capture the relationships and context that typically exist
with respect to the range, operating constraints and objectives of individual information supply
chain entities. It also encourages analyses of information supply chain performance from a
variety of business organisational perspectives (e.g. individual nodes, confederated sub chains,
overall network).
 5

From a system development standpoint, this approach aims at flexible and rapid configuration
of alternative information supply scenarios. The implementation perspective is object‐
oriented. One goal is to produce class libraries of common model building blocks (e.g. supplier
/ buyer agents, information reordering policies, contractual agreements, information exchange
protocols), which can be adapted and reused in different applications and in different contexts.
The issue of adaptivity is central to the intended project and essential to the provision of an
added value information service to all involved entities in the information supply chain[2].

We have already established there is a need to research the potential market diffusion of
adaptive information supply chains.

Market issues need, therefore, to be identified that are expected to affect the diffusion of these
chains, and corresponding market scenarios need to be developed. In particular, the
following market‐related issues are raised as factors affecting the diffusion of adaptive
information supply chains, and thus are topics of further research:

demand‐ and supply‐related elasticity of adaptive information supply chains;

financial “drivers” which will justify the maintenance of a market for adaptive information
supply chains;
indices that provide means for analysing and forecasting information market needs.
Additional questions that also arise in this context and which need to be investigated, include:
How willing are actors involved in information supply chains to “pay” in terms of human,
capital and (especially) technology resources in order to develop such market products?
How much are end‐users (i.e. consumers) “willing to pay” for adaptive information supply
chains?
Is the information technology (IT) market sufficiently “mature” to adopt the concept of
adaptive information supply chains?

Developing market scenarios requires the identification of those financial factors that affect the
diffusion of a market product. In our view, the major factors that play a catalytic role in the
increasingly competitive environment of adaptive information supply chains are:
additional revenues, i.e. from services and applications that are either new or currently offered
only by “the competition”; and
operational savings, i.e. by applying adaptive information supply technology to reduce the cost
of existing services and applications.

In this respect, planning for adaptive information supply chains is challenging in several
regards, e.g. length of planning horizon, fast evolution in underlying services and technology,
development “lags”, etc. Moreover, the predictability of new services and applications over
such a planning horizon is highly uncertain, particularly for the individual service usage and
for market shares in a multi‐provider environment.

It would be a mistake to deal only with information supply chains in isolation and to ignore the
new industrial paradigm of mass customisation (Pine, 1993), as effective use of the latter can
 6

be so much affected by careful design of the former. Buddy will, therefore, pay close attention
to the potential for industrial advantage using mass customisation which information supply
chains can offer.

Different conceptual aspects of applicability of GST on Telecommunications, broadcasting

and information supply services industry

Place of Supply
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If the leased circuit is installed in more than one State then all the states will be considered as
place of supplies in proportion to the value of services. The states will share GST in proportion
to the value of services. Here’s a table with examples- As you can observe, in all the cases of
telecommunication services, the supply is intrastate. This is because service providers will now
need to register in every state where they supply taxable services.

Registration process

"Taxable Service" means any service provided or to be provided to a client, by a broadcasting

agency or organization in relation to broadcasting, in any manner and, in the case of
broadcasting agency or organisation, having its head office situated in any place outside India,
includes service provided by its branch office or subsidiary or representative in India or any
agent appointed in India or by any person who acts on its behalf in any manner, engaged in the
activity of selling of time slots for broadcasting of any programme or obtaining sponsorships
for programmes or collecting the broadcasting charges or permitting the rights to receive any
form of communication like sign, signal, writing, picture, image and sounds of all kinds by
transmission of electro-magnetic waves through space or through cables, direct to home signals
or by any other means to cable operator, including multisystem operator or any other person
on behalf of the said agency or organisation.

Explanation: For the removal of doubts, it is hereby declared that so long as the radio or
television programme broadcast is received in India and intended for listening or viewing, as
the case may be, by the public, such service shall be taxable service in relation to broadcasting,
even if the encryption of the signals or beaming thereof through the satellite might have taken
place outside India;

"Broadcasting" has the meaning assigned to it in clause (c ) of section 2 of the Prasar Bharati
(Broadcasting Corporation of India) Act, 1990 (25 of 1990) and also includes programme
selection, scheduling or presentation of sound or visual matter on a radio or a television channel
that is intended for public listening or viewing, as the case may be; and in the case of a
broadcasting agency or organisation, having its head office situated in any place outside India,
includes the activity of selling of time slots or obtaining sponsorships for broadcasting of any
programme or collecting the broadcasting charges or permitting the rights to receive any form
of communication like sign, signal, writing, picture, image and sounds of all kinds by
transmission of electro-magnetic waves through space or through cables, direct to home signals
or by any other means to cable operator including multisystem operator or any other person on
behalf of the said agency or organisation, by its branch office or subsidiary or representative in
India or any agent appointed in India or by any person who acts on its behalf in any manner;
 8

"Broadcasting Agency or Organization" means any agency or organization engaged in

providing service in relating to broadcasting in any manner and, in the case of a broadcasting
agency or organization, having its head office situated in any place outside India, includes its
branch office or subsidiary or representative in India or any agent appointed in India or any
person who acts on its behalf in any manner, engaged in the activity of selling of time slots for
broadcasting of any programme or obtaining sponsorships for programme or collecting the
broadcasting charges or permitting the rights to receive any form of communication like sign,
signal, writing, picture, image and sounds of all kinds by transmission of electro-magnetic
waves through space or through cables, direct to home signals or by any other means to cable
operator including multisystem operator or any other person on behalf of the said agency or
organisation

Gst Rate for telecomunication sector

Pre Gst scenario

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, telecom operators 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 telecom
operators.
 9

- Apart from a standard tax rate, telecom operators pay GST on levies as well. These include
spectrum fee, license fee, spectrum usage etc. When combined, operators pay nearly 30% of
their revenue in taxes. Telecom operators have requested for tax exemption on these levies.

GST allows for an input tax credit. In simple terms, it means that the tax paid on purchase can
be used to offset the tax on the sale. However, the industry is currently on a decline, as the
average revenue per customer has decreased. Prices are competitive, and operators are unable
to pass their tax liabilities to their customers.
Due to this, almost Rs. 30,000 crore is locked on an industry level as an input tax credit. The
industry would hugely benefit if they receive it as a refund.

- In continuation of the previous point, telecom companies are unable to set off their taxes
against fuel. All telecom companies use diesel as a fuel, and it attracts almost 100% taxes.
Diesel has been kept out of the purview of GST and as a result, they are unable to utilise it to
their benefit.

Telecom services are provided to customers under 22 circles spread across the country. Their
entire infrastructure is designed to operate under this framework. The GST system mandates
them to report revenues as per states and Union Territories. Due to this requirement, operators
are called to spend and hire an additional workforce to stay compliant.
Earlier telecom companies were registered centrally and would file their returns annually. As
per the GST system, they have to register and submit within each state. GST requires them to
file their returns 2-3 times in a month. Further, the filing has to be done transaction-wise for
both income and expenditure. It is a huge challenge as there are large numbers of transactions
in this sector. It is time, and resource consuming that has increased the sector’s operational
burden.

- GST allows telecom operators to avail tax credit on imported equipment. They can also claim
refund of IGST paid on domestic products and equipment. This was not permitted before GST.

Conclusion
GST is a game changer that is slated to revolutionize the industry, and in turn, the economy. It
eliminates several challenges of the previous taxation system and will become more robust
with suitable changes in the future.

Post Gst regime

The Telecom sector, with its mammoth outreach to more than a billion subscribers cutting
across State boundaries, is one of the India’s core economic drivers India is only second to
 10

China in terms of the number of connections and subscribers. The sector is also among the top
five employment generators in India.
Telecom sector of India can basically be divided into three parts, the telecom service providers,
infrastructure providers and equipment manufacturers. Telecom operators to pay GST at 18%
as opposed to the previous slab 15%

1. Telecommunication services presently attract service tax of 14% along with Swachh Bharat
Cess (SBC) of 0.5% and Krishi Kalyan Cess (KKC) of 0.5%. While service tax is a pure value
added tax, the above-mentioned cesses are not. This is for the reason that while no ITC (input
tax credit) of SBC is available, the ITC of KKC is allowed to be set off only against KKC.
Therefore, both the cesses are turnover tax.
2. As against the above, the telecommunication services will attract GST of 18% in the GST
regime, which is a pure value added tax because full ITC of inputs and input services used in
the course or furtherance of business by the telecommunication service provider would be
available.
3. Moreover, presently telecom service providers are neither eligible for credit of VAT paid on
goods nor of special additional duty (SAD) paid on imported goods/equipment. However,
under GST, telecom service providers would avail credit of IGST paid on domestically
procured goods as also imported goods. As per some estimates, this additional input tax credit
would be as much as 2% of the turnover of the telecom industry. Further, ITC of service tax
paid on assignment of spectrum by the Government in 2016 is presently allowed to be availed
of by the telcos over a period of 3 years. In the GST regime, the entire credit can be taken in
the same year. Resultantly, the balance two-thirds credit of the previous year would be
admissible in the current financial year itself. All of these would reduce the telcos liability to
pay GST through cash to about 87% of what they paid in the last fiscal.
4. Thus, the telcos are required to re-work their costing and credits availability and re-jig their
prices and ensure that the increased availability of credits is passed on to the customers by
lowering their costs.

Broadcasting and Information supply services

There are two entries in GST Schedule of Service in regard to services rendered for displaying
Films, as under;
1) HSN code 997332 : Licensing services for the right to broadcast and show original films,
sound recordings, radio and television programme etc. : GST Rate laid down is 12% to 18%
under entry No. 17 of Notfn No. 11/2017-CT(R) dated 28.6.2017, wherein, a) The Heading of
the entry is, “Heading 9973─Leasing or rental services” & b) Description of Service under this
entry, in regard to IPR is, “(i) Temporary or permanent transfer or permitting the use or
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enjoyment of Intellectual Property right (IPR) in respect of goods other than Information
Technology software”
2) HSN code 999612 : Motion picture, videotape, television and radio programme production
services : GST Rate 12% to 28% under entry No.34 of Notfn No. 11/2017-CT(R) dated
28.6.2017, wherein, a) The Heading of the entry is, “Heading 9996─“Recreational, cultural
and sporting services” & b) Description of Service under this entry, in regard to admission
ticket for exhibition of cinematograph films is, ii) Services by way of admission to exhibition
of cinematograph films where price of admission ticket is one hundred rupees or less─Here the
rate of GST is 12% (6% CGST & 6% SGST), w.e.f. 1.1.2019. iia) Services by way of admission
to exhibition of cinematograph films where price of admission ticket is above one hundred
rupees─Here the rate of GST is 18% (9% CGST & 9% SGST).
From the entry described above, it explicitly clear that it is in regard to admission to a place
where Film will be exhibited and here the incidence of Tax is on admission for exhibition of
Films & its burden falls on the ultimate consumers. And Films can not be exhibited without
transfer of right to broadcast and show original Films under HSN code 9973.

Conclusion. ─1. When Services are Supplied with Right to Broadcast & Show Films, the GST
payable by the recipient is 12% (6% CGST + 6% SGST) under HSN Code 9973. After
obtaining the Right to Broadcast & Show Films, when the Film is exhibited to the viewers,
they are liable to pay GST @12%/18% depending upon the admission ticket under HSN code
9996.

GST: Impact on the Telecommunications Sector

From the conventional belief of being a communication service provider to providing multiple
streams of value-added services, the telecommunications (telecom) sector has become one of
India’s core economic drivers. India is only second to China1 in terms of the number of
connections and subscribers. The sector is also among the top five employment generators in
India. In the present scenario, this sector could be broadly divided into three segments: telecom
service providers, infrastructure providers, and equipment manufacturers. Although the
emergence of the latter two is thanks to the former, their importance in terms of the telecom
sector as a whole is crucial. Given the mammoth volume of subscriber connections and the
revenue generated from this sector, it is evident that the telecom industry is due for a serious
overhaul with the evolving indirect tax scenario i.e. the introduction of Goods and Services
Tax (GST).
GST – possibly one of India’s greatest indirect tax reforms – proposes to unify the multitude
of indirect taxes in India and bring all goods and services under a single GST. It will not only
boost economic growth but will also improve the ease of doing business in India by allowing
a seamless flow of goods and tax credits across all categories of transactions and state borders
without any barriers or restrictions. Presently, the telecom industry faces several shortcomings
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such as the cascading effect of taxes, issues with the classification of services, etc. that hamper
the growth of this sector. In this article, we aim to decipher the various aspects of the telecom
sector that may change in the GST regime.

Selective issues pertaining to the telecom sector under the current indirect tax
legislation and evaluation under GST

 The concept of ‘Necessity Services’: One of the major drawbacks of the GST regime
could be the direct spike in the service tax rate from 14% to 20–22%. Being a regressive
taxation system, the burn of increased tax rates will directly be faced by the end
consumer unless the credit is passed on to the next in business chain. Given the
importance of communication services in our lives, they could easily qualify as
‘Necessity Services’. Thus, one could hope that the government considers allotting
telecom services under the lower rate category and, in turn, charge a reduced GST rate
reserved only for Necessity Goods. Nevertheless, this ambitious demand could be
represented but is less likely to be accepted.

 Mandatory annual audit compliance: Until now, telecom service providers did not have
to comply with a mandatory ‘audit obligation’ as per the Finance Act 1994 (as
amended). But, they were certainly liable to ‘audit scrutiny’ by the service tax
department if the service provider was identified as the select assesse for audit
purposes. It is widely perceived that under the GST regime, VAT audit procedures may
get adopted. With the merger of both goods and services under one authority,
mandatory audit provisions may apply to both goods and service providers alike. As a
result, telecom operators may need to engage with at least two entities, one for
compliance and another for audit, failing which a possibility of conflict of interest may
arise. Such dual engagement with tax firms and management services providers will
further lead to an adverse hike in compliance cost.
 Status of exemption notification for distributors: Telecom companies appoint agents
and distributors for sale of SIM cards and recharge coupon vouchers. These
agents/distributors are exempted from service tax as per Notification Sr. No. 29(f) of
Notification No. 25/2012-ST. But, similar exemptions for distributors may or may not
be available under GST. And, if the exemption is rescinded, millions of mobile
distributors will have to comply with the provisions of the previously unknown world
of indirect tax.
 Distribution of input service credits: Telecom companies usually incur high cumulative
service costs such as advertising expenses, legal expenses, etc. that are borne by the
Head office (HO) at the first point of contact. The input credit availed for the above is
then split across revenue centres through the Input Service Distributor scheme (ISD)
under service tax. But under the GST regime, an ISD Scheme (or any equivalent) is
still unheard of, mainly because of the remote practical possibility of splitting a state
tax pool (SGST) across other states. For example, a telecom company HO may incur
advertising expenses of INR 1 billion, with input tax credit (ITC) of INR 100 million
 13

of Maharashtra GST (MGST @ 10%) and INR 100 million of Central GST (CGST @
10%), being local procurement of services. The telecom company then passes on the
expenses (not the ITC) to revenue centres across its 22 circles. On the credit front, we
can still, theoretically, mull over the possibility of passing on CGST to other revenue
centres, but passing on MGST to other revenue centres will not serve any purpose as
MGST will not be allowed as ITC in other regions. As a part of the solution, either the
‘ISD Method’ could be used wherein modified ISD rules under GST could facilitate
credit transfers, or the ‘Billing Method’ could be used by the HO to simply split the
expense and bill the same to the revenue centres for the combined services they
acquired at an IGST rate. But as a point of caution, the Billing Method will require
strict ‘service valuation rules’ to ascertain the taxable value on transfer of services; or
else, there may be a high possibility that the expense transfers may be misused by
corporates to serve as a window for their tax malpractices.
 Mobile wallets: In these changing times, telecom companies have also evolved tenfold
in order to optimise their customer service. From mere communication services, they
have grown to include complex services such as value-added services, internet
services, advertising services, etc. and next up is the mobile wallet service. Top
telecom service providers including Airtel and Vodafone have already launched their
mobile wallets, Airtel Money and Vodafone M-pesa. Most mobile wallets in India
follow either the Closed Model or the Semi-closed Model, which restricts the
utilisation of credit money to a specified set of services. The indirect tax implication
on mobile wallet services remains clouded as several counsels across India have
differing opinions regarding its ‘point of taxation’. Under the GST regime, it is
expected that a clear inclusion of this service within the service ambit or a clear
exclusion of this service as a transaction in money should be distinctly defined, thus
ending the debate over its taxability. Inter-linking charges/charges for access to other
circles: Inter-linking charges are charges paid by telecom companies to one another
(telecom peers) for usage of each other’s networks and towers when their users are
outside their subscribed region. Currently, these charges may get covered under the
definition of the term ‘services’ and hence, service tax is applicable. Under GST, there
are various apprehensions e.g. would GST be applicable in cases where such inter-
linking services are provided by one company to another? What would the place of
supply of such services be? And in which state would the credit pertaining to the same
be available? Furthermore, under GST legislation, it would also be vital to evaluate
whether there would be a tax on the supply of inter-linking services between two
branches of the same company, considering whether the branches are in the same state
or different states.
 Cenvat credit on towers: Infrastructure providers, also known as tower companies, are
one of the three broad segments of the telecom sector. In this regard, it is relevant to
refer to Bharti Airtel Ltd vs Commissioner of Central Excise, Pune, wherein credit on
the towers, its parts thereof and pre-fabricated building material used for providing
telecommunication service, was denied on the grounds that the goods under
consideration would neither qualify under the definition of ‘capital goods’ nor ‘inputs’
as defined under Cenvat Credit Rules, 2004. Accordingly, due to the factor of
 14

immovability in the goods, there is ambiguity with respect to availing such credit.
Under GST, it would be interesting to understand whether such ambiguity would
continue or if there would be some certainty with no restrictions on availing credit.
Considering the intention to have a seamless flow of credit under GST, a view can be
adopted that there should not be any bar in availing credit.
 Place of supply for telecommunication: Currently, in cases where both the telecom
service provider and service receiver are in India, services would accrue at the place of
service receiver through Rule 3 of the Place of Provision of Service Rules; but given
its central nature, the complications of chargeability were not pondered upon in depth.
However, under GST, it would be pertinent to determine the state that will receive the
revenue of the SGST so paid and hence, the telecom companies will require a detailed
explanation as to what could be perceived as the Place of Supply of Service.
Subscribing to the Destination Principle, we believe that there are two major
possibilities for recognising place of supply, one being the Place of Service Receiver
(permanent registered address) or the Location of Service Receiver (tracked per second
by the telecom tower the receiver is utilising). However, based on feasibility, the
former (Place of Service Receiver) could be a likely favourite among lawmakers.
 Power and Fuel: Power and fuel comprise around 5-10% of the total expense in the
telecom industry. And unfortunately, at present, indirect tax in the form of electricity
duty, excise and state levy on both these expenses cannot be availed as input tax credit.
On one hand, petroleum consumption is not considered as an ‘input’ under the Cenvat
Credit Rules thus, remaining ineligible for credit ailment; and on the other, electricity
duty also cannot be claimed as a creditable tax as it is a state levy.
 The proposed GST law is yet in the law-making phase and can still be influenced by a
strong lobby to subsume electricity duty. We have observed globally that countries like
Malaysia have subsumed electricity under GST and considered it as a part of either
goods or services. Thus, in line with global trends and for the greater good of the
industry and trade, we perceive that electricity duty shall be subsumed under GST. On
the other hand, even though petroleum has been brought under the GST regime, unlike
others, the central government (with the help of Entry 84 of Union List) and the state
government (with the help of Entry 54 of State List) still reserve the right to levy tax
on petroleum. Thus, in the worst-case scenario, there is a possibility that petroleum
may be liable to all taxes i.e. a GST levy, central levy (excise) and a state levy (VAT),
all at the same time. Nevertheless, on an optimistic note, central and state governments
may not choose to levy their taxes and under the GST regime, petroleum may finally
become creditable once announced by the GST Council.
 Sale of SIM cards: sale of goods or provision of service? The crux of the various
judicial rulings is that the amount received by the cellular telephone company from its
subscribers towards SIM cards will form part of the taxable value for levy of service
tax as the SIM cards on their own, without the services, would hardly have any value.
However, 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
 15

of service. Under GST, it would be critical to understand how the same would be
treated – as goods or services or a comprehensive definition of goods and services
would be introduced to eliminate this problem of double taxation faced by the sector.
Furthermore, other points for consideration are where SIM cards shall be taxed i.e.
what shall be the place of supply – when telecom companies sell the SIM card to
distributors, when the distributor sells the SIM card to the customer, or when it is
activated by the customer? Would tax be levied on each point of sale and would the
tax revenue be distributed among the states accordingly or would tax be levied on the
initial sale transaction exempting the subsequent sale transaction? Furthermore, under
GST legislation, it would also be vital to evaluate the state that shall be eligible for
revenue of SGST.

 State-wise registration may be required considering the states where services are
provided as against centralised service tax registration under the current indirect tax
regime. Accordingly, compliances (such as documentation, audits, invoicing systems)
may be required for each state under which registration has been obtained.
 The entire operating system of companies may need to be revamped to accommodate
a state-level, GST driven mechanism and processes.
 A new GST clause considering the proposed GST may have to be created to replace
the existing indirect tax– related clauses under the agreement with various suppliers,
customers, etc.
 Considering the probable implications of the proposed GST legislation, companies
may consider revaluating alternative business structures for undertaking operations

Advantages and disadvantages of GST :-

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Conclusion

With studies stating that India will emerge as a leading player in the virtual world by having
the highest internet users by 2025, there is great untapped potential in the rural market for
telecom companies. In order to achieve the congruent goal of broadening the telecom business\
and attaining socio-economic development, it is essential that the cost of consumption of
telecom services goes down, for which it is necessary that lawmakers draft the GST framework
considering the issues under the current indirect tax legislation with the intention of curtailing
it or having clarity on the same. Additionally, the lawmakers should also consider the advanced
products telecom companies offer to their customers (such as mobile wallets) and should seek
to cover such transactions appropriately under the new indirect tax legislation with a vision of
having minimal litigations at a future date. Furthermore, given the unsettled parliamentary
conditions, the industry should step forward and urge the government to clear the GST Bill as
soon as possible and help spur overall growth.
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References:-

(1) https://cleartax.in/
(2) https://taxguru.in/goods-and-service-tax/cbec-asks-telcos-
pass-benefit-gst-customers.html
(3) https://gstcouncil.gov.in/sites/default/files/Explanatory