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1. The Indian telecommunication industry is one of the largest and fastest growing industry in the world today, catering to a mammoth volume of subscribers and second only to China in terms of the number of connections and subscribers1 . Given the present era where the Internet of Things (IoT) seems all too real, telecommunication is a highly important hack in our day to day lives, justifying its label as a service of 'necessity'. At present, service tax is levied on telecommunication services provided by a telecommunication operator in the territory of India, and selling agents or distributors of SIM cards are exempt from service tax. The advent of the proposed Goods and Services Tax (GST) from 2017 has harboured changes to the taxation of telecommunication services. This article seeks to cover some aspects of Place of Supply (POS) for the purposes of taxation of the Telecommunication sector in India.
Model GST Law
2. In preparation for the roll-out of GST in 2017, the Government of India released a revised Model GST Law (MGL) in the public domain on November25th, 2016. "Telecommunication services" are defined in the MGL thus:
"telecommunication service" means service of any description (including electronic mail, voice mail, data services, audio text services, video text services, radio paging and cellular mobile telephone services) which is made available to users by means of any transmission or reception of signs, signals, writing, images and sounds or intelligence of any nature, by wire, radio, visual or other electro-magnetic means
The Model law for levy of Integrated Goods and Services Tax (Model IGST Law) as released on June 14th, 2016 provides for means to determine the POS of telecommunication services. The POS for telecommunication services, considering the many types of telecommunication networks, has been stipulated under section 6(12) of the draft IGST Act as under:
Thus, the provisions as they stood under MGL required the suppliers of telecommunication services to maintain an updated database of the billing address(es) and location(s) of the service recipients in order to have effective GST implementation. Admittedly, this would have been a superhuman exercise.
The Indian telecommunication sector at present is spread over 22 Service Areas/ Circles, with some circles catering to more than one State. Presently, the services provided by telecom service providers to their customer(s) in different circles (during roaming) will not be a taxable service as no consideration is paid by and between the circles. Therefore, telecom service providers face no service tax liability for such roaming services provided in the existing regime. However, under GST, telecom service provider in each circle might be required to be registered separately as a distinct person. MGL treats service provided by one taxable person to another taxable person as a supply of service and GST is payable even on the supply without consideration (Schedule I of Draft CGST Law released in June 16). Thus, the question arises as to whether the services provided by telecom service providers to their customers in different circles (during roaming) will be considered a as taxable supply exigible to levy of GST?
Upon consideration of the innumerable representations made by various industries after the release of MGL, the Revised Draft Model GST Law was placed in the public domain. Simultaneously, the Revised Draft IGST Law, Draft GST Compensation Law was made available on November 25th, 2016. The Revised IGST Law has undergone changes in Section 9(12), which enumerates provisions for POS of telecommunication sector. The changes effected by the Revised IGST Law, with a comparative analysis of the provisions under draft IGST Act are as follows:
3. In conclusion, the phrase 'address of record' has been bandied about with no exposition non the need for such an insertion. Arguably, the nature of business in India is such that many re-sellers and small-time suppliers of recharge vouchers are neither registered, nor capable of being brought within the tax net. The phrase 'any other person' also deserves amplification. Does it refer to a telecom operator as it seems to be the most direct inference, or is the clause intentionally vague to embrace un-registered or small-time suppliers or part-time vendors?
It goes without saying that Laws are not only to be relevant for the era that they seek to govern, but also have to be futuristic. Seemingly, the provisions for Place of Supply fall short of covering the entire gamut of emerging technology and interconnectivity in that respect.
2. Assuming that the telecommunication operator is registered in New Delhi, and the whole of NCR is covered under one service circle of New Delhi.