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Industry Guide:

Telecommunication Services

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1. What is the value of telecommunication service? 

The value of a telecommunication service means the total consideration paid by the recipient for the provision of the service and for each period in respect of which an invoice for the service is issued. 

2. When should GST be charged?

GST should be charged and accounted for at the time of supply. This is known as the ‘tax point’. In general, services are supplied when they are performed or completed. This is known as the ‘basic tax point’. 

The basic tax point is set aside when an ‘actual’ tax point is created. 

The supply of telecommunication services is treated as taking place at the earliest of the following events: 

(a) a tax invoice is issued for that supply; or

(b) payment is received for that supply. 

3. What is the tax points for particular transactions?

(a) Continuous Supplies of Service

  Where services are supplied over a period of time and paid for periodically, a tax point is created each time a payment is received or a tax invoice is issued, whichever is earlier.

(b) Services supplied in units at frequent intervals 

  If the time when each unit was supplied cannot be determine, the tax point is taken as the time when an invoice is issued or when payment for services performed up to a specified date is received, whichever happens first.

(c) Staged payments and part payments 

  Staged payments or part payments, create a tax point at the time the payment is due or is made; whichever occurs first.

(d) Property and leasehold 

  For periodical payments of commercial rent, the tax point is that prescribed by the contract, i.e. when the service is performed, or the date when payment is received, or the date of issue of a tax invoice, whichever happens first.

4. Are deposits received from customers subject to GST?

Deposits that form part payment of the total consideration payable by the customer, is subject to standard rate at the time of payment of the deposits. On the other hand, if the deposits are used as security and will be fully refunded upon completion of the contract, no GST will be chargeable. 

5. Is GST chargeable on a security/floating deposit which is used as a security bond and is fully refundable?

No. However, if at the end of the transaction, the floating deposit is used as a payment for services, GST shall be chargeable at the time the deposit is used for the payment.

6. Sometimes telecommunication services are bundled with non taxable supply. What is the value of supply for GST purpose?

Telecommunication services are sometimes bundled with non taxable or out of scope supply. For example, donation by way of short message service (SMS). SMS is taxable as a telecommunication service, whereas the donation is not a supply. If all of the following criteria are met, tax applies only to the taxable services provided as part of the package.

  Each supply is separately priced.
  The customer chooses the supplies that are part of the package.

  The total price of the package depends on the individually priced supply that the customer has selected.

  The supplies are separately itemized on the tax invoice. 

If these conditions are not met, then tax applies to the total charge for the package.

7. Can the reseller of prepaid cards or airtime credits recover input tax on other costs relating to the sale?

The sale of prepaid card or air time credit is not subject to GST because the prepaid card or air time credit is treated as face value voucher. However the sale of the prepaid card or air time credit is a taxable supply. Thus, registered person can claim input tax incurred on the cost relating to the supply of prepaid card or air time credit.

8. If the hotel charges its customers for IDD calls, are such charges subject to GST?

The IDD calls supplier is not the hotelier but by the Telco. However, the hotelier may charge its customer surcharge, for example, call set-up charge. Such surcharge is subject to GST.

9. Can the telephone bills be treated as tax invoices?

Yes. The bills can be treated as tax invoices if all the information that is required of a tax invoice is provided in the telephone bill.

10. What is the GST treatment for self-consumed telecommunication services?

When Telco provides telecommunication services for its own use, there is no consideration for the services. Thus, such services are not considered as a supply.

11. If services are provided free to employees, should output tax be accounted?  

There is no need to account output tax as no supply is treated as being made by the taxable person when services are provided free to employees.

12. If the taxable person provides fringe benefits to his employees at a subsidized or discounted price, what is the value of supply on which output tax is accounted?

Where fringe benefits are provided to the employees at a subsidised or discounted price, the value of supply on which output tax is accounted should be the subsidized price or discounted price.

13. If I offer phone calling service (e.g. Wartel) in my outlet, do I need to charge GST on the phone calls made by my customers?   

An entrepreneur that provide phone calling service in his premise may not be considered as telecommunication services provider. However, you are considered as reseller of telecommunication services. Since you are providing a comfortable and private setting in which customers can make calls in your premise, you are providing ‘hospitality’ services to your customer. If you are a taxable person, you are required to charge GST on the set-up charge in addition to the local call charges mark up.

14. Are commissions derived from the sale of telecommunication services package subject to GST?

If a person is merely acting as a selling agent, GST will be chargeable on the commission received by him if the person is GST registered. As an agent the GST registered person concludes agreements in the name of and for the account of service of another person, he will be deemed to have supplied a service. His commission will therefore be liable to GST.

15. What is the GST treatment for a promotion package given by Telco to a new subscriber of telecommunication service, whereby an item (e.g. mobile phone) attached within the package is given free of charge to the customer who subscribes the service?  

GST will be charged on the price paid by the consumer. The whole package is treated as being sold at a price offered by Telco to the customer for the service.

16. What is the GST treatment for a promotion package given by Telco to a customer whereby he is entitled to purchase another telephony service at a reduced price upon a purchase of a specific telephony service at normal rate?  

GST will be charged on the full price of the first telephony service and on the reduced price of the second telephony service.

17. What is the GST treatment on the bad debts due to non-payment of telecommunication services bill?  

Provided that all the conditions of bad debt relief have been satisfied, Telco needs to make adjustment in the GST return by increasing the input tax.

18. What happens if the customer pays back the debts after the relief has been claimed? 

Telco has to make an adjustment in the GST return by increasing the output tax.
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