Pre-paid segment faces disruption over introduction of GST

3 Jul 2017

India’s mobile providers are expecting a potential reduction in revenue following disruption surrounding the implementation of the new Goods and Services Tax (GST) system. The Economic Times writes that many distributors and retailers were unable to register under the new scheme by 1 July, preventing the outlets from selling top-ups for pre-paid customers, which make up around 90% of India’s wireless subscribers and provide more than 80% of the industry’s revenue. A large number of pre-paid customers use the lowest denomination of vouchers available and recharge their accounts on a daily basis and the disruption could potentially leave many without service. Further, the news outlet reported that even where distributors had been able to complete registration, customers faced additional uncertainty over tariffs, as the retailers had not been sent updated information from cellcos detailing how much credit customers would receive for their top-ups. Commenting on the disruption, director general of industry group the Cellular Operators Association of India (COAI) Rajan Matthews said: ‘All policy changes of this size are bound to face teething problems. As long as the government and industry work together for the greater good, we are certain that all issues will get resolved.’

In a related development, India has added a 10% basic customs duty (BCD) on mobile phone imports to provide incentives for the local manufacturing industry. Under the tax structure in place prior to the GST, imported smartphones had cost an additional 11.5% compared to Indian-made handsets, but the new tax system would have eliminated any difference between locally-made and imported devices. The new BCD ensures the continuation of the incentives.

India