Telecom companies to absorb GST burden on prepaid users

Come Saturday, telcos are likely to absorb a 3% increase in tax rate under the goods & services tax (GST) regime on their full talk-time (FTT) prepaid products as well as on select data sachet prepaid vouchers amid heightened competition following Reliance Jio’s entry, four people aware of the issue told ET. 

The FTT prepaid vouchers, typically range between Rs 100 and Rs 1,000, and the inclusive service tax component is fully absorbed by telcos across denominations. Data sachet prepaid products, in turn, are priced between Rs 15 and Rs 150, offering as little as 20 MB to as much as a GB of data with varying validity periods. Telecom services now attract 15% service tax, but going forward, the applicable GST rate would be higher at 18% from next month. 

“Starting July 1, we’ve decided to absorb the 18% GST rate on all full talk-time prepaid vouchers priced at Rs 200 and above as the objective is to maintain price points to hold on to prepaid customers opting for these products,” a top executive of a Big 3 telco, who did not wish to be named, told ET. 

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