Union Budget 2023: The telecom industry has said that it wants the government to support the expansion of infrastructure, mainly around the rollout of 5G networks and the development of internet connectivity in rural areas. Apex telecom lobby in India, Cellular Operators Association of India (COAI), which includes members like Vodafone Idea, Bharti Airtel, and Reliance Jio, has said that as telecom is one of the highly regulated sectors in the country, it is expecting relief in terms of taxes and regulatory levies on telecom operators to encourage the flow of investment in the industry.
“The telecom industry needs investment in robust and reliable communication infrastructure to meet the rising demand for connectivity. There is an urgent need to reduce the burden of levies on the sector,” COAI Director General S P Kochhar said.
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Here are a few crucial recommendations from the industry for the government ahead of the Budget to help the expansion of the telecom sector.
Suspension of regulatory levies: COAI has noted that the government should consider suspending the USO (universal service obligation) contribution of 5 per cent of AGR (adjusted gross revenue) till the existing USO corpus is exhausted. The licence fee be brought down from 3 per cent to 1.5 per cent to cover only administrative costs by the Department of Telecom or the government.
“Prevailing license fee is 8 per cent of AGR, which includes a 5 per cent levy for USO Fund. The existing USO Fund corpus, which is more than Rs 59,000 crore, is sufficient to meet USO objectives for the next few years. Contribution towards USO can be suspended till the existing corpus is utilised,” COAI said.
It has also demanded 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.
Tweaks in tax regime: The body has asked for a special regime for telecom operators under Section 72 of the Income Tax Act, 1961. Under this, the body said that business losses can be carried forth and set off till 16 assessment years from the existing 8 years.
Besides, COAI has also asked for tax deduction at source (TDS) to be cut by 1 per cent from the existing 5 per cent under Section 194H of the Income Tax Act for telecom distributors.
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“In the recommendations for the Budget 2023, the industry has urged the government to bring down the threshold of keeping 75 per cent book value of fixed assets to 50 per cent 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,” COAI noted, highlighting that the tax terms put undue restrictions on high technology-driven telecom businesses that are required to upgrade their network on a regular basis.
“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.
Customs duty: The apex body has said that the government should consider exempting the industry BCD (basic customs duty) charges on the import of equipment like Optical Transport Equipment/Networks, IP Radios, MIMO/LTE products, Soft Switches, VoIPs, PTN, MPLS -TP, etc., which will help in the faster roll-out of 5G in India.
At present, the government levies a basic customs duty of 20 per cent on the import of IP radios, LTE products, optical transport equipment, and other telecom equipment.
“Higher customs duty on telecom equipment is disrupting cost-effectiveness for telecommunication companies. Exemption from BCD should be granted on telecom equipment,” it noted.
“Till the time good quality equipment is available in India at affordable prices, customs duties for 4G/5G related network products, along with other related products, should be brought down to nil,” COAI said.
It also highlighted that the government should clarify tariff and exemption notifications, which require a clear classification.
Goods and Services Tax: COAI has asked for a centralised registration process to facilitate ease of doing business for industries spread across all states and Union Territories. 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.
Exemption of License Fee and Spectrum Usage Charges
Seeking a refund of the Rs 32,000-crore input tax credit (ITC), COAI said that levies such contributions to the Universal Service Obligation Fund and licence fees should be brought down to increase the financial viability of the sector. At present, the licence fee is 8 per cent of the adjusted gross revenue (AGR), of which 5 per cent goes as the contribution to the Universal Service Obligation Fund.
“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.
(With agency inputs)
