Cellular Operators Association of India (COAI), the body that represents the telecom sector, has made a list of recommendations to the Finance Ministry for the Union Budget 2023-24. The body said that the recommendations are the most pressing and critically needed for the sector’s ease of doing business and financial health.
“Telecom is one of the highly regulated sectors in the country. 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,” said Lt Gen Dr SP Kochhar, Director General of COAI.
He also said that telcos constantly need to upgrade their infrastructure and since most of the equipment has not been set up in India, the sector is dependent on imports. Kochhar said that relaxation in import duties will go a long way in helping the sector regain its financial health.
Here’s what COAI recommended for the Budget 2023:
Regulatory levies: The body requested the government to reduce the USO (universal service obligation) contribution of 5 per cent of AGR (adjusted gross revenue) to be suspended till the existing USO corpus is exhausted and licence fee be brought down from 3 per cent to 1.5 per cent to cover only administrative costs by DoT or the government.
It also stated that the definition of Gross Revenue (GR) should make it clear that the revenue from activities that require no licence should not be part of the GR.
Direct taxes: The body has also asked for a special regime for telecom operators under Section 72 of the Income Tax Act, 1961, where business losses can be carried forth and set-off till 16 assessment years from the existing 8 years.
“In the recommendations, the industry has urged the government to bring down the threshold of keeping 75% book value of fixed assets to 50%, to be held for a maximum period of 2-3 years. The relaxation of this condition would also facilitate an environment supporting the Digital India initiative of the government,” said the body, arguing that it puts undue restrictions on high technology-driven businesses including telecom that are required to regularly upgrade their network.
“Regarding TDS under section 195 of the Act on Interconnect Usage Charge (IUC) payments to Foreign Telecom Operators, it is recommended that CBDT issues a circular/instruction mandating no withholding on IUC payments to other operators and clarifying that provision of domestic law cannot be read into or overridden by the provisions of the tax treaties between two countries, unless the treaty is amended by both the countries,” it said.
The body also recommended the issuance of a clarification that trade margins earned by telecom distributors do not fall under the TDS ambit.
Customs duty: COAI also suggested exempting the industry BCD (basic customs duty) charges on import of equipment like Optical Transport Equipment/Networks, IP Radios, MIMO/LTE products, Soft Switches, VoIPs, PTN, MPLS -TP, etc, which will help in faster roll-out of 5G in India.
It also highlighted that there are interpretational issues when it comes to tariff and exemption notifications, which require a clear classification.
GST: It recommended a centralised registration process to facilitate ease of doing business for industries spread across all states and UTs. It has also recommended issuing a clarification so that ITC on network equipment installed on towers is not denied, due to the ambiguity in the law.
COAI has also requested a notification to be issued in exemption of levying of GST on Spectrum Acquisition Charges, License Fee (LF) and Spectrum Usage Charges (SUC). “It is recommended to refund the accumulation of 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,” it said.
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