Telecom service providers (TSPs), on Wednesday, sought a reformative tax regime for the industry in the upcoming Budget, and said Universal Service Obligation (USO) contribution of five per cent of adjusted gross revenue (AGR) may be suspended till the existing USO corpus is exhausted.

The Cellular Operators Association of India (COAI) also said that the licence fee be brought down from three per cent to one per cent at the earliest, to cover only administrative costs by the Department of Telecommunications (DoT)/ government.

The present definition of gross revenue (GR) includes revenue from all telecom activities. The term telecom activity is not defined, but may include revenue from activities believed to be incidental to telecom activity. It is requested that the definition of GR should make it abundantly clear that the revenue from activities for which no licence is required, should not be a part of GR, it said.

On GST, the industry body has recommended to refund the accumulation of input tax credit (ITC), which is over Rs.32,000 crore and is posing a huge financial burden on the telecom operators. As an alternative, this amount could be allowed to be adjusted against statutory dues payable or to be used as collateral against loans.

At present, GST is being paid by the operators under reverse charge mechanism (RCM) on supplies by government, more particularly on spectrum acquisition fees, license fee (LF) and spectrum usage charges (SUC).

“Given the huge burden of taxes and regulatory levies on telecom operators, and the critical nature of the service to drive Digital India, a special benefit may be provided to telecom operators by way of exemption of GST on regulatory payments of LF, SUC and spectrum assigned under auction. It would provide substantial relief and help in the revival of the industry,” SP Kochhar, Director General, COAI said.

Telcos are constantly upgrading infrastructure to keep up with the new-age technologies. However, the required facility to manufacture the equipment has not yet been set up in India, he said.

“Therefore, telcos are dependent on imports. Considering the financial health of the industry and the huge investments underway to fulfill our goal of a digitally connected India in line with the National Broadband Mission, relaxation in import duties will go a long way in helping us to realise our dream of an ‘Atmanirbhar Bharat,” Kochhar added.