In a bid to boost broadband penetration in the country, mobile service companies have sought several fiscal incentives, including a waiver of service tax for broadband users.

They have sought amendment the IT Rules to clarify that the 3G spectrum fee payment qualifies as ‘intangible asset.'

“Telecom operators have made significant investment for 3G business and we would like the Government to ensure that proper tax deduction is conferred to the telecom operators in respect of such expenditure,” said Mr R. S. Mathews, Director-General, Cellular Operators Association of India (COAI). “Government should bring out specific amendment to proviso to Section 36(1)(iii) to provide for capitalisation of interest cost incurred on capital borrowed for the purpose of acquisition of 3G spectrum, up to the date of commencement of provision of 3G services.”

To encourage consumers for buying devices for broadband connection, the operators have asked the Government to allow subscribers to claim tax deduction on the spend for buying phones or computers. “Broadband penetration is low in the country so we have to provide some incentives to both the consumers and operators that will help in uptake of services. If subscribers get tax benefit on buying a computing device then it will address the issue of affordability,” said Mr S.C. Khanna, Secretary-General, Association of Unified Service Providers of India (AUSPI)

The operators have urged the Finance Ministry to remove the requirement of quoting PAN while taking a mobile connection. “Many low-end subscribers and subscribers in the rural areas do not have PAN numbers and the same acts as a hindrance towards spread of service. In this regard, it is pertinent to note that many of these low-end subscribers like, electrician, plumbers, vegetable vendors are not income-tax assesses,” Mr Mathews said.

One of the long-standing demand of the telecom industry has been that duties and taxes levied should be rationalised. The operators claim that as much as 30 per cent of their revenue is paid out to the Government in the form of various duties and levies, compared to around 5 per cent of the revenues paid by operators in other Asian countries.

The operators also want extension of tax holiday under section 80-IA up to April for operators who started services after 2005. According to rules, telecommunication services should start before April 1, 2005 for the exemption. “With the slowdown in economy, new operators are finding it difficult to achieve financial closure in the absence of this benefit. It will help in providing level playing field for all telecom operators who have been issued licences by the Government at different times from 1994 till date,” Mr Mathews added.

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