Voda Idea chairman expresses concern over Rs 30,000 crore locked up on account of GST payment under 'reverse charge mechanism'
Kumar Mangalam Birla, chairman of Vodafone Idea, has expressed concerns over severe liquidity crunch in the telecom sector and high spectrum payments in a recent meeting with telecom ministry.
This was confirmed by a senior official from the Department of Telecommunications (DoT) on Wednesday. The issue was raised during a meeting with telecom minister Manoj Sinha and telecom secretary Aruna Sundararajan.
However, the discussions were informal and a final view on the issue will be taken by DoT once a formal representation is made, the official said.
The official declined to comment on the relief package for the telecom industry as a decision with this effect will be taken by the finance ministry.
Vodafone India and Idea Cellular have merged recently to create an entity called Vodafone Idea, which became the largest telecom player pushing down Bharti Airtel to the second spot.
Since the entry of Reliance Jio into the sector, the telecom industry has seen declining margins and profits with voice services becoming virtually free. This hyper competition also triggered a consolidation phase where many exited the Indian telecom market and some merged with others. Now, only three players are left – Vodafone Idea, Bharti Airtel and Reliance Jio, apart from a telecom PSU BSNL/MTNL.
The mobile data tariffs have come down to a new low with voice becoming virtually free impacting the financials of the incumbents.
The cumulative debt of the industry stands at around Rs 7.6 lakh crore.
Birla also expressed concern over Rs 30,000 crore that is locked up on account of Goods and Services Tax (GST) payment under 'reverse charge mechanism' Under the GST 'reverse charge mechanism' provision, registered dealers are required to make tax payments in case he procures goods from unregistered businesses, according to an agency report. The provision was applicable from July 1, 2017 till October 12, 2017. With companies facing trouble in implementing the provision, the GST Council has decided to keep RCM in abeyance till September 30, 2019.
Last week, in its first quarterly result for the merged entity Vodafone Idea, the company announced plans to raise capital of about Rs 25,000 crore, including infusion by Vodafone Group of Rs 11,000 crore and Aditya Birla Group of up to Rs 7,250 crore.If approved, the plan of raising capital is expected to complete in the fourth quarter of FY2019. Vodafone Idea loss after tax stood at Rs 4,974 crore in the July-September quarter, which included a one-time charge of Rs 566 crore, mainly due to integration and merger related costs.
STIFF COMPETITION
- Since the entry of Reliance Jio into the sector, the telecom industry has seen declining margins and profits with voice services becoming virtually free
- This hyper competition also triggered a consolidation phase where many exited the Indian telecom market and some merged with others
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