15% service tax on spectrum allocation and one-time spectrum payment increases cost of services: Indian telcos

India’s GSM telecom operators, in their Budget recommendations, said that allocation of spectrum and one-time spectrum payment should not be subject to service tax of 15%. The telcos, through their industry body COAI, said that the tax increases the cost of providing telecom services due to credit blockage/ deferral, which has a direct and an adverse impact on common man.

  • Make Telecom Talk My Trusted Source
  • Source of Google
  • Source of Google

The industry body said that “Assignment of spectrum, a scarce natural resource, is an important sovereign functions of the government and treating such activity as ‘service’ at par with normal commercial transactions is deviation from standard practices adopted across the world.”

COAI also suggested that interconnection, bandwidth and roaming charges should not be characterised as ‘royalty’. It added that these charges should not attract 20 per cent TDS.

“Tax authorities have now started taking a position that payments made by telecom companies, even for standard telecom services, are in the nature of Royalty, resulting in protracted litigation not only on characterization but also on withholding taxes,” the industry body said.

india-telecom-map

COAI represents top telecom operators like Bharti Airtel, Vodafone India, Idea Cellular, Telenor, Aircel, and Mukesh Ambani-led Reliance Jio, which is a new entrant in the market.

Also read: Reliance Jio doesn’t need COAI intervention over interconnection issue: Report

The body has also asked for a lower TDS rate of 2%on discount extended to pre-paid distributors. Telecom companies transfer prepaid vouchers and SIM cards to independent distributors at a discount, who further sell to retailers and subscribers.