Struggling Telcos, tax-rate cut and GST collection’s big-hit
What’s Happening this week?
Today we decided to hit home ground this time — and talk about taxes. Not in the boring way — have a read yourself!
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GST collection hit the grand INR 1 Lakh Crore mark — to be clear — this isn’t the first time the GST collection crossed this mark. Then, why the celebration now? So essentially, there has been a lot of chatter around India’s struggling economic conditions…
Why? What happened? Well, to begin with, India’s growth rate has been declining — and hit 4.5 percent — the lowest in six years since 2012–13. The rating agencies cut the GDP predictions for the current financial year by nearly 1.5 percent. Following the reading, India’s economic growth fell for the sixth straight quarter.
Cause of the slip? Well, there has been a lot of turbulence in consumer spending and private investments, bundled with weak export growth due to global economic slowdown.
What now? The goal for $5 trillion economy is still alive… for it to thrive — the FinMin took the tax-cut route — after the initial corporate tax rate cut in Sep to 22% from 30%, there came in another tax rate cut was announced later in November — making it 15%. But, *conditionals apply –
Something for everyone? Well… Nirmala Sitharaman, says they haven’t forgotten about individual taxpayers, and are reviewing individual tax benefits periodically.
Let’s hope that happens soon, until then… Plan your finances better — we at Quicko are always here when it comes to anything taxes.
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Dialing… Telcos are calling for help… India’s thriving telecom sector with over a dozen players now has 3 struggling players — Vodafone Idea, Airtel, and Jio.
As a lifeline, telcos are urging the government to reconsider the taxes on the sector. Mathew Oommen — the president of Jio — proposes the license fees should be bought down to 1% from 8%, INR 50,000 crore in USOF (Universal Service Obligation) and INR 35,000 crore of GST refunds should be utilized to aid the struggling industry.
More on numbers, the telecom operators in India pay nearly 7.6% of their revenue to the government for airwaves, making total transfers of nearly 29–32% transfers to the government — highest in the world! And not to forget — the spectrum auctions — high spectrum cost and the competitive market conditions — forced telcos to borrow billions of dollars.
Wait there is more… telcos pay 18% GST — amm… Well actually, users pay — given the nature of GST to be an indirect tax — meaning its tax liability can be moved to the customer.
In the meanwhile… The government says they are looking at some relief measures for the telco sector. Till that happens — telcos have raised the tariffs to sustain themselves. It looks like the only way to stay afloat.
Thinking out loud… If there is another tax cut — where will the government its revenue? Considering they aren’t going to increase the corporate tax rates amidst all the economic concerns — prospects of lowering the individual tax rates do not look positive. What do you think?