The Hindu Business Line : 'As mobile base grows, so does service tax kitty'

AN exponential increase in the cellular subscriber base will ring in a whopping Rs 12,650 crore as service tax for the Government by the end of 2007-08.

The current level of Rs 4,470 crore from the telecom sector is already the single largest source of service tax for the Government.

According to the Associated Chambers of Commerce Eco Pulse (AEP) study, the service tax revenue from the telecom revolution will register a three-fold increase by the end of 2007-08 when the total subscriber base would hit the level of 278 million.

The AEP study found that while the number of telephone subscribers being added per month is three million, the figure would go up to five million per month with the total subscriber base growing three-fold in the next three years.

"The telecom revolution, particularly in the mobile segment, has helped in increasing the Government revenue. What should be heartening for the Government is that the trend is going to continue," the Assocham President, Mr Mahendra K. Sanghi, said while releasing the study.

The telephone segment has been a dominant contributor to the service tax kitty ever since the levy was introduced in 1994. In 1998-99, it contributed 54 per cent of the total service tax revenues.

Telecom operators have been demanding a reduction in levies and taxes to bring down the cost of offering services further.

The importance of telecom for the Government's finances can be gauged from the fact that while over 70 services grossed Rs 14,134 crore in 2004-05, the tax on telephone brought in revenues over Rs 4,470 crore.

The Budget estimates for the current fiscal put this figure at Rs 5,186 crore on a total estimated service tax of Rs 17,500 crore.

The total mobile subscriber base touched 52.22 million in the 2004-05 fiscal, registering a growth of 55 per cent over last year. This subscriber base has gone up to a level of 59.83 million during July 2005, adding 2.5 million customers a month.

With the current pace of growth in the telephone industry, it is likely that the revenue target set by the Government would touch Rs 7,195 crore at the end of the current fiscal, the study said.

"There are still 800 million people who are outside the network of cellular phones in the country and it is expected that the growth in the number of telephone subscribers would be more pronounced in the mobile segment. It is expected the total subscriber base would reach 250 million by the end of December 2007.

"To reach this target, India needs to add, on an average, 5 million subscribers per month. If such growth takes place, AEP projects that the telephone industry would contribute substantially to the service tax revenue of the exchequer," said a press release.

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