Supreme Court ruling on AGR will impact you too

Thomas K Thomas Mumbai | Updated on November 27, 2019 Published on November 26, 2019

Telecom operators may withdraw free talktime, late fee waivers and discounts

Free talktime, late fee waivers and rebates on pre-paid vouchers for telecom consumers could be a thing of the past following the Supreme Court’s ruling on Adjusted Gross Revenue.

According to the court’s ruling, telecom operators cannot exclude any revenue they earn, including notional income or revenue forgone by the operator. For example, an operator usually offers a voucher of ₹10 for 10 minutes of talk time and adds another extra two minutes without charges. Until now the operator paid revenue share to the government on the ₹10 that he earned selling that voucher. Post the Supreme Court’s order, the operator will have to pay a revenue share on ₹12, adding the revenue waived for the additional two minutes of free talk time.

“It’s not just the telecom operators that have been hit by the Supreme Court’s ruling on Adjusted Gross Revenue, even consumers will bear the brunt of the decision. Operators will stop offering discounts and waivers because they do not want to be in a situation where they have to pay revenue share to the government on income that they did not receive,” said an industry expert.

Licence fee woes

Operators have to pay 8 per cent of their revenues as licence fees to the government. Until now, they were paying the revenue share on income earned offering services. The Supreme Court ruling has changed it to include all revenues including those earned from things such as foreign exchange gains, sale of machinery and shares. According to the apex court ruling, the definition of gross revenue as specified in the telecom licence cannot be diluted in any manner. Such a definition does not exclude discounts, commissions rebates etc from the computation of gross revenue.

Exclusion of such amounts, including trade discounts, discounts on international roaming commission, discounts allowed to distributors on sale of prepaid vouchers and cash discounts, from the computation of gross revenue cannot be sought. Even commissions offered to trade – distributors/retailers will be counted as revenue.

“Basically, operators will be left with no flexibility. Operators will have to pay revenue share on revenue they have not earned but are presumed to have earned because of the discounts,” said an executive at a top operator. “There will be a serious impact on operators’ overall cost of operations. This will force them to raise tariffs and consumers will again have to pay for erroneous regulations,” he added.

While Airtel and Vodafone Idea have filed a review petition against the order, Airtel’s petition is limited to seeking a waiver of interest fee and penalty imposed by the government for non-payment of AGR dues. “The DoT should review its stand on the definition of AGR. Else we’re in for a tough ride,” said an executive at another operator.

Published on November 26, 2019
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