Telcos urge for regulating taxes in Budget

Our Bureau New Delhi | Updated on January 21, 2021

Urge FM to regulate taxes including removal of GST on license fees, spectrum usage charges (SUCs) and payment of spectrum acquired in auction

The telecom operators in their Budget wishlist have urged the Finance Minister (FM) Nirmala Sitharaman to regulate taxes including removal of GST on license fees, spectrum usage charges (SUCs) and payment of spectrum acquired in auction.

In its recommendations letter to the FM, Cellular Operators Association of India (COAI) that represents the telcos said that currently, the total license fee (LF) having a rate of 8 per cent of adjusted gross revenue (AGR) is uniformly applicable to all licensees, of which 5 per cent goes to the Universal Service Obligation Fund (USOF) and the remaining 3 per cent is levied as LF.

Also read: ‘5G auction pricing must be set at reasonable levels for telcos’

“International benchmarks show that India’s LF per cent is way above the world average. Given the above, the industry recommends that the LF is brought down to 1 per cent from 3 per cent at the earliest to cover admin costs by the Department of Telecommunications (DoT)/ government. USOF need to be abolished. In addition to this, the industry demands that the effective rate of the SUC be reduced by 3 per cent for all the telecom service providers (TSPs),” SP Kochhar, Director General, COAI, said.

The telecom network in India covers more than five-lakh villages. Though the average revenue per user (ARPU) is under pressure, TSPs in India have managed to reach among the top contributors in FDI over the last two decades. The industry contributes nearly ₹58,000 crore per annum to the government exchequer.

With a total of ₹11.24 lakh crore investment till date, telecom has emerged as the second-largest sector in terms of private investment in infrastructure. Since 2010, the industry has spent ₹68,000 crore in spectrum auctions alone, he said.

Therefore, the industry recommends that in line with the international practice, payment of regulatory levies made by telecom operators should be exempted from tax under GST, he said.

Also read: Spectrum auctions: History set to repeat itself

It has also recommended for refund of unutilised input tax credit (ITC) of ₹35,000 crore. The current market dynamics has led to the accumulation of massive ITC.

“The credit would further increase with upcoming significant capital expenditure to further enhance customer experience and achieve the vision of a digital India,” Kochhar said.

The COAI has also urged for tax exemption and clarification on service tax on Right of Way (ROW) and recommended that the scope of the exemption be expanded to include ‘appropriate authority’ as defined in ROW rules in addition to the exemption granted to the ‘local authority’.

Further, it has requested for exemption of custom duty on certain telecom equipment which presently increases the cost of rolling out critical infrastructure.

“Around 85 per cent of the telecom equipments are imported and BCD of 20 per cent is levied on import of most of equipment like Antennas, Optical Transport Equipment’s/ Networks, IP Radios, MIMO/LTE products, Switches, VoIPs etc,” he said

This is disrupting the cost-effectiveness of the telcos and impacting the financials of the sector negatively, he added.

Published on January 21, 2021

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