Telecom companies had already dragging the fact that they are not eligible to take credit of Input tax credit (ITC) of the taxes paid under earlier service tax law . Now , they got one more burden in their account as they have received notices from the department for the payment of service tax and GST on their AGR dues. It is also expected that these companies are libel to pay interest too in the range of 15% to 18% on the outstanding tax amount.
Both the GST and the Service tax is clear about the fact that companies are liable to pay taxes on spectrum and licence fees payable by them. However, it is still not clear whether these companies will be eligible to take input tax credit (ITC) under the GST regime, of the service tax liability on AGR dues under the previous regime.
Under GST and the earlier tax regime (April 1, 2016 to July 1, 2017), it has been mentioned that companies receiving services from the government are liable to pay taxes under the reverse charge mechanism. Under this, the service receiver is liable to pay taxes but taxes shall be paid by the service provider to the government. Thus, in this case, telecom companies would be liable to pay taxes on services (spectrum and licence services) receivable by them from the government (here, the Department of Telecommunications) both during the pre-GST period (April 1, 2016 to June 30, 2017) and from July 1, 2017, when the GST came into the force .
There is no doubt about the eligibility of telecom companies to claim ITC on GST payable but at the same time it is not very clear , if they can make a similar claim on the service tax payable by them now. Also, the current case is not covered under any of the situations, where refund option is available.