The Hindu Business Line : Single levy for telecom may be linked with lower tariffs

New Delhi, Oct 2 The Government may link its proposal to introduce a single tax structure for the telecom sector with a condition that such a move will simultaneously result in lower tariffs for consumers.

The sub-committee of the Department of Telecom, which is reviewing the present structure of taxes on the telecom sector, has asked the operators to give details on how rationalisation of levies will impact the tariffs offered to consumers. The Finance Minister, Mr P. Chidambaram, had announced a single tax regime for the telecom sector during his Budget speech.

While the mobile operators, through the Cellular Operators Association of India, have told DoT that any benefits arising as result of a reduction in levies will be passed on to the consumers, they have proposed a formula whereby all taxes and levies imposed by the Central Government and the various State Governments are clubbed together into a single levy.

“In the past, whenever policy actions have been initiated for a reduction in the burden on mobile service providers, the same has been passed on to the consumers. For example, when the service providers were offered migration from a fixed to a revenue share licence fee regime, the benefits were passed by way of an immediate reduction in tariffs,” said a COAI letter in response to a query from DoT.

At present, telecom operators have to pay multifarious levies including licence fee, spectrum charges, access deficit charges, service tax, entry tax, stamp duties and octroi.

The total incidence on the operators as a result of these levies is around 30 per cent. COAI has proposed that a single levy structure should be introduced in three phases.

They have also suggested that if the Government wants a direct impact on telecom tariffs then the total incidence of this unified levy should be less than what the operators are coughing out at present.

COAI proposal

In the first step, the COAI has proposed that all telecom related levies charged by the Central Government such as licence fee and spectrum charges should be clubbed together into a single telecom tax.

In the second phase, all other Central levies such as service tax should be included in the single telecom tax to be charged as a percentage of the operator’s revenue. In the third phase, the levies imposed by the various State Governments should also be brought under the composite tax.

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