The domestic telecom sector, which had always hailed GST as an “iconic reform”, is not overly enthused by the 18 per cent rate and fears this will further stress its already bleeding operations. The industry fears this will worsen its financial woes.

“We are disappointed with the announced rate of 18 per cent. We had submitted to the government that consideration must be given to the present financial condition of the sector and any rate beyond the existing 15 per cent makes telecom services more expensive for the consumer,” said Rajan S Mathews, Director-General of the Cellular Operators’ Association of India (COAI).

“This is also likely to slow down the planned rollout of infrastructure across the country and will have an impact on flagship government initiatives like Digital India, Cashless India and others,” he said, adding that as an essential service, the telecom industry needs some benefits and tax relaxation.

Further, the country is divided into 22 telecom circles, while GST sees the country as 29 States and seven Union Territory divisions, resulting in a dichotomy between area covered by telecom circles and State boundaries.

This would further create significant IT and accounting challenges for operators.

Others in the industry also mirrored the sentiments. “Imposing an 18 per cent tax on telecom is likely to increase the overall tax burden and therefore may have a negative impact on the consumers’ expenses.

It needs to be appreciated that telecom is a necessity and an extremely important infrastructure service & resource and thus deserves more sensitive treatment,” said Uday Pimprikar, Tax Partner at EY India.

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