Providing clarity in spectrum trading, the government has proposed to amend the Finance Act of 1994 to make the transfer or sale of spectrum taxable.

“I propose to amend the Finance Act, 1994, so as to declare assignment by the Government of the right to use the radio-frequency spectrum and its subsequent transfers a service, to make it clear that assignment of right to use the spectrum is a service leviable to service tax and not sale of intangible goods,” the Finance Minister said in the Budget speech.

The government has newly introduced spectrum fee for auction of airwaves and there was an uncertainty in tax treatment of payments in respect of spectrum.

The confusion was that whether spectrum is an intangible asset and the spectrum fees paid is eligible for depreciation under Section 32 or whether it is in the nature of a 'licence to operate telecommunication business' and eligible for deduction under Section 35ABB of the Act.

rajesh.kurup@thehindu.co.in

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