New Delhi: The country's over 900 million mobile phone users will have to shell out more money on their bills with the proposed hike in service tax rate to 12 percent from 10 percent in the Budget on Friday.
GSM lobby Cellular Operators' Association of India (COAI) said the increase in service tax is detrimental to the objectives of rural penetration and affordable rates for the consumers.

"The increased costs will eventually be borne by the consumers in the form of higher charges for the services," COAI said.

Country's largest telecom firm Bharti Airtel said the hike in service tax will increase cost of services to customers and also impact the P&L (Profit and Loss) statement of telecom companies.

"The telecom sector is already burdened with multiple and high tax levies which account for 30% of the telecom services revenue...As a highly taxed industry, this will certainly have a further impact on the consumer," Bharti Airtel CEO (India and South Asia) Sanjay Kapoor said.

Saying that while many systemic elements have been set right in the 2012-13 Union budget, numerous challenges continue to impact the (telecom) industry, Sistema Shyam TeleServices Limited President and CEO Vsevolod Rozanov said.

"Increase in service tax from 10 percent to 12 percent would increase cost of ownership of a mobile phone," he added.

Telecom also expressed disappointment as no specific announcements related to the sector were made in the budget.

"From a global perspective, the Indian telecom industry continues to attract the highest tax rate of 23 percent. It would have been good, if this could have been rationalised as the industry is clearly getting squeezed on account of such outflows and the hesitation of banks to lend money to operators makes the situation all the more difficult," Rozanov said.

The telecom operators have been raising concerns about squeezed margins on account of high operational costs. Mobile phone usage rates in India are among the cheapest globally.

Rozanov added that this would have a deep impact on the roll out of voice and data services for the common man, specially in the rural areas.

COAI, however, welcomed the move provisioning infrastructure funding, including that for cellular towers, Optical Fibre Cables (OFC) and cables to work through Gap funding.

This is expected to bring down the operating capex considerably for operators, COAI said adding that "provision of mobile tracking for fertiliser subsidy also looks to be favourable."