The Cabinet Committee on Infrastructure recognised the importance of the ‘telecommunication towers sector’ and included it in the Harmonized Master list of Infrastructure sectors in 2012. However, till date, no tax or fiscal benefit has been granted to the telecom infrastructure sector. The sector needs to invest ₹20,000 crore to install new towers to make Digital India a success and to reduce call drops. But without the benefits that an infrastructure status can bring, the industry will be unable to make these investments that have a long payback period.
The telecom infrastructure sector should be given 100 per cent tax deduction on capital expenditure under Section 35AD of the Income Tax Act, and tax holiday under Section 80IA.
The telecom infrastructure sector should be allowed to refinance the existing External Commercial Borrowing (ECB) loans after meeting loan conditions. Further, the ‘end use’ of ECB should also be relaxed to include brown-field investments and acquisitions. The sector should also be made eligible to issue tax free bonds and access long-term low-cost debt through infrastructure debt funds (IDFs).
Telecom infrastructure service providers should be considered ‘industrial undertakings’, covered by Section 72A of the Income-Tax Act. This will allow the firms to carry forward and set off accumulated losses and unabsorbed depreciation, similar to the benefit granted in 2002 to telecom service providers.
The sector is facing massive litigation over service tax for CENVAT credit disallowance on ‘towers & shelters’, as these are not classified as ‘capital goods’ in tariff schedules. Such classification under CENVAT credit rules is not warranted when the towers and shelters are already classified as capital goods under Indian Generally Accepted Accounting Principles.
The writer is President - Asia, American Tower Corporation