The Indian telecom sector has been in a state of upheaval every since Anil Ambani-led Reliance Industries introduced Reliance Jio in the country. The newbie telecom operator not only offered mobile data and voice calls at a significantly reduced price but also improved the state of connectivity in the country. The fear of losing their subscriber base to Jio has forced the telecom giants like Airtel, Vodafone and Idea, who were charging hefty amounts from their subscribers, to offer their services at a reduced cost.
Anf the revolution that began with Jio is now being succeeded by the Goods and Service Tax (GST), which is all set to come into effect on July 1, 2017. The GST Council has made the decision and the tax that will be levied on the telecom sector has been set to 18 percent as against 15 percent service tax that was being charged until now.
Though the difference in the tax being charged in the telecom sector might seem nominal, it is likely to have noticeable repercussions not only on the part of the telecom companies but also on the part of the consumers, who might have to bear the brunt of the rise in tax.
To put into perspective, the postpaid users, who have subscribed to a pack of Rs 1,000 will end up paying at least Rs 30 extra every month. On the other hand, if you are prepaid user and you have opted for a voice pack of Rs 100, you will get just Rs 82.20 as against Rs 83.96, which was being offered till now.
The telcos can take one of the two high routes to tackle the tax rise– either they would offer reduced value in the existing data and voice packs or they would change the tariffs altogether. However, it’s unlikely that the telecom giants would opt to change the tariff plans as its impact might echo on the subscriber end as well.
As far as the full talk-time tariff plans are concerned, the telcos might have to shell out the extra tax component from their own pockets
Broadband rates are likely to bring in a similar dilemma, though the impact there might not be as visible owing to the nature of the existing data packs.
Apart from the additional cost that will cascade down to the end of the subscribers, another area that will witness the impact of the tax rise will be the speed with which these telcos develop the infrastructure in the country. The 3 percent rise in the tax might slow down the speed of infrastructural development in India (which means we might have to wait a little longer before 5G sets foot in India).
With GST kicking in on July 1, our telephone bills are definitely going up. What remains to be seen is how the telcos ‘adjust’ their plans while maintaining a balance between the consumers and their own profits.
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