gst: Service tax, GST added to AGR dues

NEW DELHI: Telecom companies swamped by adjusted gross revenue (AGR) dues are set for another hammering. The tax authorities have started sending out notices for service tax and goods and services tax (GST) on the unpaid AGR dues.

Notices for paying 15% service tax for the period before the GST regime came into effect and 18% GST since July 1, 2017, were being issued by field offices, said people aware of the matter. GST was rolled out in July 2017.

“Field formations have started reaching out to telcos, demanding that service tax on the service provided be paid up on top of unpaid AGR dues,” one of the officials said.

Notices to Cos that Shut Ops

Another official added that tax demand notices are also being sent to carriers that have shut and undergoing insolvency.

The carriers confirmed the development and said that they were seeking legal advice on the next steps.

“Operators have received notices for service tax and GST on AGR,” said Rajan Mathews, director general of the Cellular Operators Association of India (COAI), which represents all carriers including Bharti Airtel, Vodafone Idea, Reliance Jio Infocomm and others. “We are checking with competent counsel regarding service tax payments for prior years because it is not clear how these will be offset under GST.”

Lawyers aware of the development however said that the tax payments are likely to be cost outgo for the carriers under the reverse-charge mechanism. This means companies cannot retrieve the cost from consumers and cannot avail credit to offset it.

“Prior to introduction of GST, service tax was payable under reverse-charge mechanism on such charges by telecom companies,” said Rajat Bose, partner at law firm Shardul Amarchand Mangaldas. “The levy of service tax at the rate of 15% on AGR dues will be a cost outgo for telcos since they may not be eligible to avail cenvat credit of such service tax.”

Carriers including Bharti Airtel and Vodafone Idea, along with Tata Teleservices, Telenor, Aircel and Reliance Communications, have to pay Rs 1.47 lakh crore to the government at the earliest, after the Supreme Court came down heavily on the companies for not paying by the deadline it had imposed.