Summary of Time of Supply for Spectrum usage services
GST Circular No 222/16/2024 has been issued for Time of Supply for Spectrum usage services on 26-06-2024. Government has received query for when telecom operators should pay GST on Spectrum allocation. it is specially for when operators choose to pay for the spectrum in installments over time as allowed by the government.
Now the question is Should GST be paid when the entire spectrum fee is paid at once or should it be paid in installments along with the installment payments?
Issue: In cases of spectrum allocation where the successful bidder (i.e. the ‘telecom operator’) opts for making payments in instalments as mentioned in the Notice Inviting Application (NIA) and Frequency Assignment Letter (FAL) issued by Department of Telecommunications (DoT), Government of India, what will be the time of supply for the purpose of payment of GST on the said supply of spectrum allocation services.
The Government of India, through the Department of Telecommunications, provides spectrum to telecom operators who bid for the right to use it. The Telecom Operator is the recipient of service and the government is service provider. The Telecom Operator must pay GST under RCM on spectrum allocation services as per Notification No 13/2017- Central Tax (Rate).
If the Telecom Operator choose to pay in installments, these payments are spread over the contract period, following the scheduled mentioned in Frequency Assignment letter. This type of arrangement is called Continous Supply of Services as it is provided for the more than 3 months with regular payment obligations.
The Time of Supply is determined under section 13(1) and 13(2) of the CGST Act, For this type of services GST liability arises on earliest of issue of the invoice or when spectrum service is provided or telecom operator makes the payment.
For the services where GST is paid under RCM, the Time of supply is the earliest of the date when the payment is recorded in the Books of account or debited from bank account of telecom operator, 60 days after the invoice or any document is issued by the government.
Some Tax authorities are treating the Frequency Assignment letter issued by DoT as if were an invoice. They are demanding on Interest on payment made after 60 days from the issuance of this letter assuming it act as invoice. However, The frequency Assignment letter is not an invoice. It is Bid acceptance document which provides the telecom operator auction results , Spectrum block alloted , Payment Options and amount due under contract.
As spectrum is continous services and its payment schedule is fixed in the contract the invoice must be issued before or on the due date of payment specified in contract. The Due dates for payment mentioned in Notice Inviting Application and Frequency Assignment letter.
If the Telecom operator makes full Upfront payment , GST must be paid when the payment is due or made w.e earlier.But if Operator choose to pay installments , GST must be paid as and when each installment is due or paid, w.e.earlier. The same GST provisions applicable to other natural resources allocated by the government , where services are provided continously. Payments for these services can be made upfront or in installments .
