Know what you pay; Telecommunication levy & tax.

I come across lot of people complaining on hidden charges by mobile or fixed telecommunication companies. Of course, most of us know that there are taxes added to the charges. But lot of people get mislead by the advertisements. Or in other words, most people take little notice of the ‘conditions apply‘ or ‘taxes applicable‘ or ‘relevant taxes to be added‘ taglines which appear in the adverts (mostly in small fonts) ! With this post I’m trying to share few facts on these charging mechanisms (to an extend I know).

Lot of customers talk about ‘VAT’ but few know that after a tax revision from 1st of January 2011, VAT ( ECL, MSL & NBT ) has been replaced with different taxes, namely ‘Effective License Tax’ & ‘Effective Telecommunication Levy’.

The Effective License Tax for mobile (termed as Effective Other Government Levy when charging for Broadband, fixed line, CDMA & Pay TV) amounts to 2.04%. This is applicable on all standard usage including IDD and roaming charges. But it is not charged for the components due to 3rd party services like E-channeling, M-ticket etc. (however, it will be applied to operator charges of these services.( i.e for the call made to e-channeling short code)

The Effective Telecommunication Levy (for mobile, fixed, CDMA & pay-TV) amounts to 20.41%. This is applicable on all charging for all standard elements where VAT was applied previously EXCEPT IDD call charges. Again this is not charged for components due to third party services.

Therefore the TOTAL Tax component which is applicable on charging for all standard elements (EXCEPT IDD calls) is;

(License Tax – 2.04%) + (Telecommunication Levy – 20.41%) = 22.45%

When it comes to IDD calls (for which E.T.L 20.41% is NOT applied) a FLAT RATE of Rs. 2 PER MINUTE is charged as IDD Levy. (this is applicable to mobile & fixed, voice or video) Also this applies to IDD calling cards. But this is not applicable for IDD SMS or MMS. This will be charged on according to the charging method- per minute or per second.

To sum up all, for any local voice/video call, local SMS, IDD SMS, GPRS & rentals  the tax component is 22.45% and for IDD calls tax component is 2.04% + a special levy of Rs.2 per minute will apply.

This is the reason (although operators advertise call rate as 1 rupee & SMS rate as 25 cents) you get charged Rs.1.23 for calls & 31 cents for an SMS.

Say the call charge for India is Rs.2 per minute; the E.L.T of 2.04% is added to that Rs.2 and a flat rate of Rs.2 is added separately. If you speak 1 minute, charge will be Rs.4.4 (4 rupee and 4 cents). Some people mistakenly think that the tax percentage is 100% that they get charged Rs.4 for a Rs.2 call (which is not true since the Rs.2 is a flat rate common for calls made to any country irrelevant of the call charge per minute) !

Say, if you make a call of 80 seconds (1 minute & 20 seconds) to Saudi Arabia, and if you are on a per second package;

If normal per second IDD rate is Rs.30 per minute,
E.L.T is 2.04% i.e charge for 1 second with E.L.T is = (30/60) + (30/60 * 2.04/100) = Rs.0.5102

Charges for 80 seconds = 0.5102 * 80 = Rs. 40.81

IDD levy for 80 seconds = (2/60) * 80 = Rs.2.67

So total charges with tax = Rs.40.81 + Rs.2.67 = Rs. 43.48

Simple as that. 🙂 Hope you guys (who didn’t know this earlier) find this post useful. Also note this was written with the facts I know and I’m not an expert in this tax related field. And for any clarifications, it’ll be appropriate to contact your service providers. Your comments and any corrections are welcome.


2 thoughts on “Know what you pay; Telecommunication levy & tax.

  1. It should be noted that from this year (2012) “The fixed rate of special IDD levy” charged for IDD calls has been increased from Rs.2 to Rs.3. So, please consider that when doing above calculations. Also note this has created some confusion among users; i.e when a call to U.S.A is made for 1 minute, the call rate is Rs.2 + 2% tax + Rs.3 levy. Users get confused how tax comes more than the call rate ! 🙂

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