Understanding GST Rates for Broadband Internet Services in India
This article outlines the Goods and Services Tax (GST) implications for broadband internet services in India. It details that telecommunication services, including broadband, are subject to an 18% GST rate, a significant change from the pre-GST tax structure. The content also explains the applicability of GST based on the place of supply, clarifies the HSN and SAC codes for these services, and discusses the availability of Input Tax Credit (ITC) for internet service providers (ISPs).
Understanding GST Rates for Broadband Internet Services in India
Before the implementation of GST, telecommunication services were subject to a 14% service tax, plus a 0.5% Swachh Bharat cess and a 0.5% Krishi Kalyan cess, totaling 15%. However, with the introduction of the GST regime on July 1, 2017, telecommunication services, including broadband, were moved to a higher tax bracket. Currently, the Goods and Services Tax (GST) rate for broadband services is 18%. This article delves into how GST applies to broadband connections and internet service providers (ISPs).
Applicability of GST for Broadband Services
The Indian telecom sector is segmented into three primary areas:
- Telecom Service Providers
- Infrastructure Providers
- Equipment Manufacturers
Broadband services fall under the categories of telecom service and infrastructure providers. According to Section 2(110) of the CGST Act, 2017, a ‘telecommunication service’ is defined as: “The service of any kind (including electronic mail, data services, voice mail, audio text services, video text services, cellular mobile telephone services, and radio paging), made available to users by way of any transmission or reception of writing, signs, signals, sounds and images or intelligence of any nature, by radio, wire, visual or other electromagnetic means.”
Scope of Internet Broadband
Internet telecommunication services encompass various components:
- Internet backbone services: These include carrier services for internet traffic exchanged between different Internet Service Providers (ISPs), involving peering and transit charges.
- Internet access services: These provide direct internet connections and allocated space for customer web pages.
- Telecommunication services over the internet: This covers services like internet telephony, fax, audio conferencing, and video conferencing.
Place of Supply
The application of GST to broadband services, as part of telecommunication services, depends on the place of supply. When broadband services are supplied across state lines (inter-state supply), an Integrated Goods and Services Tax (IGST) is levied. For supplies within the same state (intra-state supply), both Central Goods and Services Tax (CGST) and State Goods and Services Tax (SGST) are applicable.
Section 12(11) of the IGST Act, 2017, outlines the nature and place of supply for broadband services and internet service providers as follows:
| Nature of Supply | Place of Supply |
|---|---|
| Services by way of fixed telecommunication lines, leased circuits, and internet leased circuits. | The location where the telecom lines or leased circuits are installed for the receipt of broadband/internet services. |
| Post-paid mobile connections for availing of telecom and internet services. | Recipient’s billing address as stated on the ISPs’ record. |
| Pre-paid mobile connections for availing of telecom and internet services and acquired through a selling agent, a SIM card distributor, a reseller, or via a recharge voucher. | Selling agent’s, distributor’s, or reseller’s address as per the ISPs’ record at the time of supply. |
| Pre-paid mobile connections sold by any person to the final subscriber for availing of telecom and internet services. | The location for receipt of prepayment or where these vouchers are sold. |
| When the suppliers of broadband services install leased circuits in multiple states and UTs and charge a consolidated sum for it. | All the involved States and UTs will be places of supply; the proportion will depend on the value for services collected separately or as per the contract’s terms or based on any agreement entered. |
GST Rate and HSN Code for Broadband Services
The GST rate applicable to broadband services is 18%. These services are classified under the HSN code 9984. Internet Service Providers (ISPs) are also subject to an 18% GST rate.
The SAC code for internet telecommunication services is 99842, specifically for carrying electronic signals over the internet. Within this, internet backbone services fall under 998421, and internet access services under 998422.
Internet access services provide direct narrowband and broadband internet connections through wired, wireless, satellite, or terrestrial methods. ISPs may bundle internet access with additional free services such as emails, web page design tools, chat applications, and security software. The scope also includes package upgrades like international roaming and remote internet access.
Availability of ITC for Internet Service Providers
Under the GST framework, telecom providers, including ISPs, are eligible to claim Input Tax Credit (ITC) on all inputs and input services used in the course or furtherance of their business. Telecom service providers can also avail credit for IGST paid on both domestic and imported goods.
Since the introduction of the GST regime, telecom providers have faced an increased tax burden, impacting their financial stability. Similarly, consumers are now paying approximately 3% more for the same broadband services.