Telecom operators will have to pay goods and services tax (GST) on spectrum, based on their payment schedule, the Central Board of Indirect Taxes and Customs (CBIC) has said. In cases where the full upfront payment is made by the telecom operator, GST would be payable when the payment of the said upfront amount is made or is due, whichever is earlier, the CBIC has said.

In other cases, where deferred payments made by the telecom operator in specified installments, GST would be payable as and when the payments are due or made, whichever is earlier, it has further said.

The clarification by the CBIC follows the GST Council meet on June 22, where it had decided a clarification would be made regarding time of supply in respect to the allotment of spectrum to telecom companies, in cases where payment of licence fee and spectrum usage charges is to be made in installments. A GST of 18% is to be levied.

The latest round of spectrum auctions started on June 25 and concluded on June 26 after seven rounds, in which the expiring spectrum in 2024 and the unsold spectrum of previous spectrum bid, held in 2022, were put to auction.

The CBIC has also clarified that similar treatment regarding the time of supply may apply in other cases also where any natural resources are being allocated by the government to the successful bidder or purchaser.

“Representations have been received from the trade and the field formations seeking clarification regarding the time of supply for payment of GST in respect of supply of spectrum allocation services in cases where the successful bidder for spectrum allocation (i.e. the telecom operator) opts for making payments in installments under deferred payment option as per Frequency Assignment Letter (FAL) issued by the Department of Telecommunication (DoT), Government of India,” said the CBIC circular.

Ankit Joshi, Associate Partner, N.A. Shah Associates, said in case of supply of spectrum allocation services, the telecom operator needs to pay GST under reverse-charge mechanism. “Earlier the department was considering the frequency allotment letter issued by DoT as an invoice and demanding GST from telecom operators as per the RCM provisions. CBIC has now clarified that the time of supply for such transactions will be earlier than the date of payments or when it is due as per the frequency assignment letter of DoT,” he said, adding that the said time of supply clarification will also apply in cases of allocation of rights, by the government, to use natural resources over a period of time.

The circular is one of the 16 circulars giving effect to several of the decisions taken by the GST Council in its recent meeting. They deal with various issues including fixing monetary limits for filing appeals by the department to the GST Appellate Tribunal, high courts and Supreme Court, taxability of wreck and salvage values in motor insurance claims, taxability of re-imbursement of securities/shares as SOP/ESPP/RSU provided by a company to its employees as well as valuation of supply of import of services by a related person where recipient is eligible to full input tax credit.

Abhishek Jain, Indirect Tax Head and Partner, KPMG, said most circulars issued are aligned to the announcements in the press release. “These circulars should help bring to rest a multitude of ongoing litigations for businesses like the one on time of supply for HAM contracts, timelines for availability of credit in case of RCM supplies received from unregistered vendors, valuation for services imported from related parties,” he said, adding that some principles mentioned in these circulars could also help better evaluate multiple other tax positions adopted.”

The GST Council had taken as many as 52 decisions and more circulars are expected in coming months.