GST and what a cable TV operator needs to do
This industry guide is meant to assist local cable operators (LCOs) in understanding the issues relating to Goods and Services Tax (GST). It provides information pertaining to the requirement and procedure for registration under the GST.
GST impact on LCOs
The taxable supplies by LCO under the cable TV industry are as follows:
(a) Supply of Cable TV package to customers;
(b) Supply of Set-top box (STB);
(c) STB repair services;
(d) Supply of Broadband package on behalf of MSO / Broadband service provider;
(e) Other related supply made for the provision of Cable TV / Broadband package;
Some of the related taxable purchases by the LCOs, which are subject to GST are as follows:-
(f) Monthly subscription charged by MSOs;
(g) STB activation charges paid to MSOs;
(h) STB repair charges paid to MSO/Vendor;
(i) Purchase of cable TV network items;
Rental of office
Supply of Cable TV packages
Supply of Cable TV services are taxable at the rate of 18%.
When supply is made to a registered / un-registered person, GST of 18% will be charged depending upon the location of recipient of services i.e. Customer. Taxable invoice will be issued at the Customer’s registered address under GST.
As a LCO, you have to identify the nature of supply i.e. whether the cable TV services are being rendered to registered person or unregistered person.
LCO makes a supply of Cable TV to an individual un-registered subscriber. Since the supply is made to an un-registered person, the LCO will issue a taxable invoice to subscriber.
In the same example if the individual is a registered person, then the LCO will issue a taxable invoice to the subscriber. On the basis of taxable invoice, individual will claim the credit of GST.
Supply of STBs on Activation
STBs are generally supplied to customers on activation basis. LCOs procure from MSOs the STBs in his name on payment of activation charges and supply the same to end-users/customers.
GST will be paid @ 18% on activation revenue collected by LCO from end-customers.
Like-wise MSO will also charge GST @ 18% on the STB activation charges from LCOs.
LCOs will take the credit of GST paid on the activation charges.
Note: Ownership of STB will always lie with the MSO since the box is not sold to LCOs. LCOs cannot sell the STB to the customer. They can provide the same on activation only.
Installation/ Re-installation service fee
Installation/Re-installation fee charged from customers are subject to GST at 18%.
STB repair charges collected
STB repair charges collected from customers are subject to GST at 18%.
STB repair charges paid
If STB repair charges are paid to registered vendor/person, LCO will claim the Input tax credit on the invoice issued by the vendor.
If the STB repair charges are paid to unregistered vendor/person, LCOs will be liable to pay GST under reverse charge mechanism.
LCO has to pay GST under Reverse charge and the same will be available as Input tax credit (ITC).
Supply of Broadband Services
During the normal course of business, LCO also acts as authorised Broadband agents for the internet service provider (ISP) company. The ISP may be an existing MSO, for whom the LCO is already working or may be a different ISP company.
LCO collects and remits the amount collected from customers for the provision of Broadband services to the ISP company. Sometimes they deduct their commission from the amount to be remitted or ISP company issues commission cheque to the account of LCO.
LCO (Broadband agent) in Delhi sells one broadband package
He collects from the purchaser (customer) on behalf of the Broadband service provider, the total purchase price for the package, plus GST. The agent forwards this amount, minus the commission and GST on the agent commission, to the company. The agent commission is 40% of the selling price of the package, not including GST.
Sample invoice by agent, if he is doing the invoicing on behalf of the Broadband service provider.
Broadband Package ₹1,000
GST (₹1,000 × 18%) ₹180
Amount paid by customer ₹1,180
Commission: ₹1,000 × 40% = ₹400
GST: ₹ 400.00 × 18% = ₹72
Sub-total: ₹472.00 ₹472
Net proceeds due to Company: ₹708
Under its GST return, the agent will report the ₹72.00 GST it charged the Broadband Company on its commission. The Broadband Company will report the ₹ 180.00 GST that the customer paid on the Broadband Package. Broadband Company can claim ₹ 72.00 as an ITC for GST it paid on the agent’s commission.
In this case Local cable operator needs to be registered with GSTN, because he is working as an agent of other taxable person i.e. Broadband Company.
Before issuing the invoice to customer, agent/ Company should ascertain the status of customer i.e. whether he is registered taxable person or un-registered taxable person.
If the Broadband package is sold to a registered taxable person, then agent/Company has to issue a taxable invoice to customer so that the purchaser of Broadband can claim input tax credit.
If the Broadband package is sold to an unregistered person, then agent/Company has to issue a taxable invoice to customer. Input tax credit cannot be claimed by un-registered person.
Do LCOs have to register under GST?
Yes, LCOs have to register for GST even if their total taxable revenue is less than the ₹ 20,00,000 threshold. LCOs are selling the cable TV packages to customers, which can only be accessed/viewed with the help of STB, which is controlled, owned and provided by the MSO.
By virtue of Section 24, Clause (vii) of CGST Act, 2017 every LCO has to register under GST.
Even if the LCO is managing only one Cable TV connection, he is liable to get registered under GST.
Is the agent of Broadband service provider liable to be registered under GST?
Yes, any person acting as an agent of Broadband service provider is required to be registered under GST. Threshold limit of ₹ 20,00,000 is not applicable in this case.
By virtue of Section 24 clause (vii) of CGST Act, 2017 every person who make taxable supply of services on behalf of other taxable persons whether as an agent or otherwise shall be required to be registered under GST.
Even if the agent is managing only one Broadband connection he is liable to get registered under GST.
Frequently asked questions
General on Cable TV industry
Q1. What are the taxes that will get merged into GST?
A1. Under GST, following taxes which are currently being paid by LCOs, will be merged such as:
- Service tax;
- Entertainment tax;
Q2. Currently my cable TV business is not liable to be registered under GST because my total taxable turnover is below ₹ 20,00,000. Am I required to apply for registration under GST?
A2. Yes, you are required to be compulsory registered under GST by virtue of clause vii of Sec 24 of CGST Act, 2017.
Q3. What is the value of Cable TV service under GST?
A3. The value of a Cable TV service means the total amount paid by the subscriber for the receipt of Cable TV services.
Q4. If a cable operator requests subscribers to give an advance payment to be offset against future subscription billing, am I required to pay GST on advance collections?
A4. Yes, you are required to pay GST on advance collections.
Q5. I am a LCO who works as a cable operator and also does installation work for Broadband. What is my taxable turnover?
A5. Your taxable turnover under GST would comprise subscription income and income from installation works for Broadband.
Q6. Are STB repair charges collected from customers subject to GST?
A6. Yes, STB repair charges collected from customers are subject to GST.
Q7. Can a LCO claim Input tax credit of GST paid on the STB repair charges?
A7. Yes, input tax credit can be claimed on STB repair charges paid to vendors registered under GST.
If the STB repairing vendor is un-registered under GST, LCO is required to pay GST under reverse charge to the Government.
Q8. A LCO collects security deposit from a customer for installation of STB at customer premises. Will he be liable to pay GST on the amount collected as security deposit?
A8. No, security deposits collected from subscribers is not a consideration for the supply of cable TV services. GST is not payable on the collection of security deposit from customers.
As per Provision to Section 2 sub-section (31) of CGST Act 2017, deposit received shall not be considered as payment made for supply of services unless the supplier applies such deposit as a consideration for the said supply.
Q9. A LCO forfeits security deposit, which was earlier collected from a customer for installation of STB at customer premises. Will he be liable to pay GST on the amount forfeited as security deposit?
A9. Generally, forfeit deposit is not considered for any supply because it constitutes a compensation payment for damages due to non-performance of the contract or for breach of contract.
Being a compensation payment for breach of contract, this deposit payment is not considered as a consideration for a supply, and therefore, it is not subject to GST.
Q10. As a Broadband distributor/agent, is my turnover based on my total collections or my commission?
A10. Annual turnover is based on the value of all taxable supplies a broadband distributor/agent have made in relation to his business. As a Broadband agent, he is selling packages on commission only. His taxable turnover will be based on the value of the commission received annually.
Q11. As a Broadband agent, I often make supplies on behalf of my principal. Who is accountable for GST on the supplies made?
A11. Your principle Broadband providing company is liable for GST on the package amount billed to customer. Broadband agent is liable to pay GST on the commission part earned on sale of broadband package.
Time of supply of services by LCO
Q12. I am a LCO. When is my time of supply of services to account for tax on the cable TV and other related services that I render?
A12. Your time of supply is the earliest of the following:
(a) Your services are fully performed
(b) You issue an invoice to customers, or
(c) You received payment for your services.
(d) Date on which the recipient shows the receipt of services in the books of accounts.
However, if an invoice is issued within 30 days after (a), then your time of supply is the date of the issuance of the invoice.
Q13. As a LCO, am I required to issue tax invoices to all my customers?
A13. Yes, you are required to do so if you are a registered person and making supply to another registered person.
Q14. Is the scanned copy of invoices to be uploaded along with GSTR-1?
A14. No scanned copy of invoices is to be uploaded. Only certain prescribed fields of information from invoice is to be uploaded.
Q14. Who needs to file returns under GST regime?
A14. Every LCO registered under GST is required to file returns under GST regime.
Q15. What are the key returns under GST to be filed by the LCOs and what is the due date for the same?
Payment of Taxes
Q16. When is the payment of taxes to be made by the supplier?
A16. Payment of taxes by the normal taxpayer is to be done on monthly basis.
Q17. Can one use input tax credit for payment of taxes under reverse charge basis?
A17. No, input tax credit cannot be used for the payment of tax under reverse charge basis.
Q18. Can GST paid on reverse charge be considered as input taxes?
A18. Yes, GST paid under reverse charge can be considered as input tax.
Q19. Does input tax include (CGST/SGST/IGST) paid on input services/goods/capital goods?
Q20. What process and activities a LCO would need to be GST compliant?
A20. From a GST compliance perspective, the following key activities and processes would need to be changed to be GST compliant:
- a) Migration of existing Service Tax registrations to GST;
- b) Invoice formats to be aligned with the GST law requirements;
- c) Sales and purchase register formats in the systems to capture the mandatory fields in order to follow the GST monthly compliances of uploading the sales register/ details of outward supplies and details of inward supplies, payment of GST, filing of GST returns, etc.;
- d) Matching the input tax credit computed by the GSTN (based on outward supply register uploaded by vendors) with the input tax credit as per the books;
- e) Computation of GST liability on a monthly basis and payment of GST;
- f) Timely payment of CGST, SGST and IGST to the respective Central/State Governments;
- g) Filing of monthly GST returns
The above stated compliances are broad level. There could be additional compliances / processes / activities to be undertaken to be GST compliant as may be prescribed under the GST law.
Q21. What are the implications of Purchase from unregistered /Composite dealers?
A21. If the purchases are done from Composite dealer, input tax credit will not be available to the recipient as the Composite dealer cannot issue Tax invoice to charge GST on supplies made by him.
In case of purchase from an unregistered dealer, it would attract GST under reverse charge on LCO.
Q22. Would GST be applicable on distribution of free Cable TV services?
A22. Cable TV services supplied free of cost to any party should not be liable to GST. However, LCO will be required to reverse corresponding input tax credit availed (if any) for supply of free Cable TV services.