India’s top telecom operators are likely to seek clarification from the finance ministry on whether bundled 4G handsets offered effectively for free would attract the 12 percent goods and services tax applicable on mobile phones.
Reliance Industries unveiled a 4G feature phone last week that may further disrupt an already stressed telecom market. The JioPhone comes with free voice service for life and can be obtained for Rs 1,500, which is refundable after three years if the handset is returned. Apart from the tax treatment, telcos may seek clarity on whether such financing schemes will enable operators to skip payment of licence fees and spectrum usage charges.
Although telcos like Bharti Airtel, Vodafone India and Idea Cellular have not subsidised handsets so far, they could offer ‘a scheme similar to what is being offered by Jio,’ HSBC Global Research said in a note to clients. These telcos would have, at best, 4-5 months to come up with matching bundling offers.
The COAI represents the country’s biggest phone companies, including Bharti Airtel, Vodafone India, Idea Cellular and Reliance Jio Infocomm.
While refundable deposits don’t attract GST, a potential grey area could be the tax treatment on the amount if the phone is not returned after three years. To be sure, an importer of the phone would pay basic customs duty and iGST.
The other issue is whether such deposits are included while calculating the licence fee and spectrum usage charges that operators pay to the government.
By Baishakhi Dutta
