Budget 2015: Mobile phone bills to go up on higher service tax rate proposal

NEW DELHI: Mobile phone bills might see a marginal increase of up to 1.5 per cent owing to the hike in service tax rate to 14 per cent from 12.36 per cent as proposed in the Union Budget.

“Currently the telecom industry is under a lot of stress and operators aren’t even passing the cost of spectrum to the users but since they can’t go on endlessly absorbing all costs, this might translate into a slightly higher bill,” Prashant Singhal, global telecoms leader at EY said.

Last time around, telecom operators had absorbed the hike in the service tax rate. The tariff rates announced are usually inclusive of the service tax.

Speaking from the point of view of telcos, Neeraj Katariya, managing consultant at PwC, said that the revenue accruing to the telecom operators’ might will take a hit of 2 per cent due to the increase in service tax rate.

“They may have to revise their tariffs structures for pre-paid customers, as their ability to offer full talk time on some vouchers will go down by about 2 per cent,” Katariya explained.

He added that operators might not touch post-paid tariffs, but customers using post-paid plans could also end up paying higher bills due to increase in service tax.

Currently, the average revenue per user accruing monthly to the industry is about Rs 119, according to the data released by the sectoral regulator.

The telecom industry is all geared up for the sale of 2G and 3G airwaves which the government will auction next week, beginning March 4. Given the dynamics of the industry and the criticality of the airwaves being put up for auction, the government is expected to net upwards of over 1 lakh crore.