The Associated Chambers of Commerce and Industry of India (Assocham), in a letter to Finance Minister Arun Jaitley, said that the proposed 15% service tax on all spectrum allotment by the Centre and spectrum transactions between licensees will place the telecom industry in a precarious financial position.
The industry body said that the move would raise cost of acquiring spectrum by up to 71%, dealing an additional blow to debt-laden carriers.
“Service tax on spectrum assigned by the government to telecom operators is detrimental to the industry’s growth while increasing the cost of service and thus directly impacting the common man. In fact, the National Telecom Policy of 2011 lays emphasis on affordability and accessibility,” the letter stated.
The letter, which was written by D.S. Rawat, secretary general, Assocham, and P. Balaji, chairman, Assocham National Council on Telecom, said that telcos would have to shell out another Rs 30,000 crore as tax outgo owing to the levy, adding that the proposal would adversely affect telcos’ investible corpus into networks and government.
According to Assocham, the proposed tax will put at risk major government initiatives like ‘Digital India’, ‘Smart Cities’ and rural penetration of data connectivity and services.
The industry body urged the minister to restrict the proposed service tax to only transactions involving spectrum trading between private operators, adding that the credit on such transactions should not be deferred.
“The increase in spectrum cost will impact the sector’s health and adversely impact the investment corpus of telecom operators, leading to challenges in rolling out new technology and networks like 4G,” Assocham added.