COAI Recommends Abolishing USOF Payments and More to Govt ahead of Budget

Reported by Tanay Singh Thakur July 10th, 2024 at 01:52 pm

COAI has also recommended that the Government of India (GoI) should allow telecom players to carry forward losses up to 16 years from the current rule of 8 years

The Indian telecom operators have to pay a 20% customs duty on the equipment they are importing from outside.

The telcos make the GST payment under RCM (reverse charge mechanism) for such things. Thus, the input tax credit (ITC) is accumulated for the telcos, which only blocks their capital for the time being.
The body highlighted that many companies have shut down since 2017 and the Supreme Court decision on the AGR matter has adversely affected the industry and its players. Allowing carry forward of losses up to 16 years will be good for the industry, suggested COAI.

The telecom industry body, COAI (Cellular Operators Association of India), has recommended that the government abolish the 5% USOF (Universal Service Obligation Fund) contribution rule for the telcos. Alternatively, the body said that the government should make the USOF contribution for the telcos nil until the existing corpus of Rs 80,000 crore is utilised fully. At present, the telcos pay 5% of their adjusted gross revenue (AGR) towards USOF. In addition, there's another 3% of AGR paid as license fees. This, the industry body has asked to be brought down to 1%.

COAI has also recommended that the Government of India (GoI) should allow telecom players to carry forward losses up to 16 years from the current rule of 8 years. The body highlighted that many companies have shut down since 2017 and the Supreme Court decision on the AGR matter has adversely affected the industry and its players. Allowing carry forward of losses up to 16 years will be good for the industry, suggested COAI.

There is also a request to exempt the service tax on additional AGR dues. The Supreme Court's order has put an additional burden of AGR dues on the telcos, and this has negatively affected the cashflow of these companies. Thus, COAI is asking the government to exempt the telcos from paying service tax on the additional AGR dues.

The Indian telecom operators have to pay a 20% customs duty on the equipment they are importing from outside. COAI has requested for this to be brought down to zero. It will help with an even faster rollout of 5G and fuel the growth of the telecom industry. The industry body has further requested that GST be exempted from payments for license fees, spectrum usage charges (SUC) and spectrum acquired in auctions. This is because the telcos make the GST payment under RCM (reverse charge mechanism) for such things. Thus, the input tax credit (ITC) is accumulated for the telcos, which only blocks their capital for the time being.

The current customs duty exemption for vessels engaged in laying submarine cables in India is set to expire on September 30, 2024. The government must intervene urgently to extend this exemption to prevent an increase in cable-laying costs, said COAI.