The upcoming GST will add another three percentage points to telephone bills, thereby decreasing profitability of telcos further.
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Telecom operators and consumers alike have more reason to worry as phone bills are set to become more expensive. After the implementation of GST (goods and service tax), the service tax imposed on telecom operators will go up from 15 percent to 18 percent, thereby making profitability even more difficult in a debt-ridden sector. With the new implementation of GST, if you have been paying a phone bill of Rs. 1,000 right now, your bill will increase by another Rs. 30.
Additionally, for prepaid users, while a recharge of Rs. 100 gives Rs. 85 of talktime today, you will only get Rs. 82 as talktime after GST is imposed. The move is expected to halter consumer demand and impact earnings from telecom operators at a time when operators across the nation are under major stress following Reliance Jio's introduction into the market. The imposition of higher tax rate will put telecom operators under further stress, in a market where all the players are already ridden with heavy tax rates.
Telecom operators have been reported to be understandably disappointed with the GST ruling. The advent of Reliance Jio has led to a price war, leading to steeply decreasing prices of data and talktime. The likes of Airtel and Vodafone have since rolled out special offers that provide unlimited data and calling at significantly cheaper prices in order to retain users under its network. The new tax structure will further restrict profit margins of telecom operators, and even hinder the revenue generation from customer usage.
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