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Mobile operators are concerned with the Finance Ministry's decision to collect service tax on telecom services at the point where the service is deemed to be provided. At present, operators pay service tax after the telecom user makes the payment.
But under the new rules operators will have to pay the service tax at the time of raising the invoice. For example, in the case of pre-paid cards, operators will have to pay service tax the moment the card is sold to the distributor. The new rule will not only require operators to change their billing system but also be ready for more cash flow.
“The above would require changes in the information technology system within 30 days for all business streams, other than for amount collected through pre-paid/recharge coupons. This change in IT systems appears to be very difficult, in which event, non-compliance would occur on payment of service tax effective April 1, 2011,” said Mr Rajan Mathews, Director-General, Cellular Operators Association of India.
“These rules should be deferred until introduction of GST, for want of time required for automation of information technology systems and possible re-engineering required again at the time of introduction of GST,” he added.
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