May-2015

IMPACT OF SERVICE TAX
ON TELECOM SERVICES
Though the telecom industry is the highest contributor of service
tax, a number of state governments have imposed heterogeneous
taxes/charges on the operators. Although these taxes are not
significantly high, they delay the rollout of networks. The myriad of
taxes hopefully would go away with the implementation of GST
CMA Dr. M.
Govindarajan
Sr. Accounts officer,
BSNL, Madurai
Telephone service is among the three services
brought into the service tax net with
effect from the date of inception itself. The
Telecom industry is monopoly in the hands of
the Central Government. After the introduction
of liberalization and globalization private
operators were encouraged to enter into telecom
sector. The technology in the telecom
is changing frequently. The technology today
will be obsolete within two years because of
the introduction of new technology.
On introducing the mobile phone services
the telecom industry has witnessed the rapid
growth. Telecommunications services are a
global market worth over US$ 1.5 trillion in
revenue as on 22nd March 2012. Mobile services
account for roughly 40 per cent of this,
while mobile subscribers worldwide currently
outnumber the use of fixed telephone lines by
more than two to one. Over the past decade,
the market has witnessed far-reaching changes,
with the introduction of competition into
a sector that was once principally a monopoly.
The Telecom services, after the liberalization
process reached the gross root level. As on
31.08.2014 the number of subscribers is as per
the table below:
Table – 1 : Total subscribers as on 31.08.2014 (in million)
Sl. No. Particulars Urban Rural Total
1 Wireless 544.69 379.63 924.32
2 Wireline 21.91 5.61 27.52
Total 566.60 385.24 951.84
Source: www.trai.gov.in
Total number of broadband subscribers as
on 31.08.2014 is 74.31 million which includes
15.05 million of wired subscribers; 58.82 million
by mobile users and 0.44 million by Fixed
wireless subscribers (Wi-Fi, Wi-Max, Point to
Point Radio & VSAT).
Initially only the telephone service is liable
for service tax. There are various problems
arised to the service providers as to the interpretation
of the statute. The developments occurred
in adding many of the telecom services
in the service tax is discussed as below:
• Telephone service - introduced with effect
from 01.07.1994;
• Pager Service – Even though the Department
had not considered the pager as a
service the same has been brought into the
service tax net with effect from 16.07.2001;
• Telegraph service – This service has been
mostly utilized by the people and this service
has been brought into service tax net with
effect from 16.07.2001;
• Facsimile - Facsimile service was introduced
since there was a demand for fast transmission
of data from one place to another, communication
by fax was the order of that day.
This results in the introduction of this service
in the service tax net with effect from
16.07.2001;
• Leased circuit - The companies used to obtain
leased line for transmission of data and
speech and they opted for networking of
various offices wherein the difference offices
www.icmai.in
MAY 2015 the MANAGEMENT ACCOUNTANT 47