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

By December 25th, 2016 AT 9:16 AM

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.

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.

“While the industry firmly believes that provisions of section 194H…are not applicable to discount extended to pre-paid distributors, in order to put an end to litigation, a position of applicability of TDS provisions on pre-paid discount may be acceptable to the industry on a go forward basis…However, considering the low margins, it is suggested that a lower withholding rate (say two per cent) may be prescribed since the rate of 5 per cent results in drastic reduction in the margins of small scale distributors,” COAI said.

The industry body also sought clarification on the scope of exempted service for the purpose of reversal of CENVAT credit. Furthermore, it also flagged imposition of service tax on the Right of Way/access charges levied by local authorities.

4
Leave a Reply

avatar
Photo and Image Files
 
 
 
3 Comment threads
1 Thread replies
0 Followers
 
Most reacted comment
Hottest comment thread
3 Comment authors
Telecom department mulls re-auction of super premium 700 MHz band this year: ReportSudhakarrajuRohan Recent comment authors
newest oldest most voted
trackback

[…] Also read: Search spectrum 15% service tax on spectrum allocation and one-time spectrum payment increases cost … […]

raju
raju

Cost ki chinta jo idea vodafone airtel use karte hai use hai hum jio use karte hai to March 2017 tak befikar

Recent Posts

Here is How Airtel Customers Can Enjoy 1TB Additional Data on Broadband Plans

To prepare a defence against the upcoming rival in the broadband market, the telecom operators and broadband providers are offering...

OnePlus 7 vs OnePlus 7 Pro: What Does the Rs 16,000 Price Difference Get You?

This is the first time that OnePlus has launched two phones side by side in two different variants. 2019 is...

Trai to Issue Consultation Paper on Regulation of OTT Apps Streaming TV Channels

After bringing rules to regulate the TV and broadcasting industry in India, the Telecom Regulatory Authority of India (Trai) is...