GST implementation is not going to be easy for mobile companies

Mobile phone companies are set to face rigid accounting and tech challenges after the implementation of the goods & services tax (GST) from July 1.


As per industry experts, telcos might even be compelled to make huge additional investments in order to overhaul and reconfigure their existing IT and billing systems so that they can be well equipped to undertake the complex task of splitting revenues from multiple sources like roaming, interconnect and termination charges.

These additional costs could go up to Rs 300 crore or more, as per rough industry estimates.

Presently, phone companies have IT and billing systems aligned at the circle level because of the government dividing India into 22 telecom service areas to ease licensing. However, since the GST of 18% (for telecom services) will be levied in 29 states and seven union territories (UTs), these telcos would have to empower their IT and billing systems to capture revenues at the state level from July 1st.

"The dichotomy between area covered by telecom circles and state boundaries could pose significant IT and accounting challenges for mobile operators," said Rajan Mathews, Director General of Cellular Operators Association of India (COAI), a body representing India's leading telcos like Bharti Airtel, Vodafone India, Idea Cellular and newcomer Reliance Jio Infocomm.

A typical case could be how intra-circle roaming revenues would be treated in the Maharashtra & Goa telecom circle, which serves as a single service area for both Maharashtra and Goa.

"For instance, if a Pune-based mobile user roams in Goa, the telco may have to identify and attribute the revenue from such intra-circle roaming services as part of Goa operations instead of Maharashtra for the purpose of computing GST," a tax expert of a Big Four firm told ET on condition of anonymity.

Punjab telecom circle, comprising of Punjab, Haryana and Union Territory (UT) of Chandigarh, or the West Bengal circle, comprising of West Bengal, Sikkim and the UT of Andaman & Nicobar islands, could also face similar problems.