India's mobile industry is asking the government to reduce the rate of the new goods and services tax (GST) from 18% to 5% for telecoms services, in light of the hefty debt burdens the industry is grappling with.
The Cellular Operators Association of India (COAI), the peak body for India's GSM industry, has welcomed the introduction of the new tax but has urged the government to implement the rate reduction.
COAI director general Rajan Mathews told the Economic Times that the nation's telecoms sector is saddled with an “unprecedented” debt of more than 4.5 trillion rupees ($69.6 billion), with a return on capital employed hovering at around 1%.
The industry is also embroiled in a cut-throat price war triggered by the entry into the market of newcomer Reliance Jio Infocomm, which has also triggered a wave of consolidation.
But Mathews also called the introduction of the GST the biggest reform since India's independence, and said it is expected to stimulate the economy by “incentivizing manufacturing and making business decisions independent of taxes.”