COAI Urges Centre to Reduce Tax Burden on Telcos in Union Budget


TheThe COAI has asked the Centre to reduce the tax burden on telecom operators in its forthcoming Union Budget, a move it said will go a long way in boosting the financial health of the sector. It said that the steps assume significance as heavy investments are needed to deploy 5G technology.

On the bureaucracy's table, COAI had suggested in its recommendations that scrapping of the USOF levy was needed in view of huge capital expenditure by TSPs. It had instead recommended that contribution of 5 percent towards USO from AGR may be deferred till the existing USO corpus of about Rs 80,000 crore is exhausted.

"The telecom industry is proving to be a significant vehicle for this transition by giving affordable connectivity and inclusiveness. Therefore, reducing the levy burden on TSPs and making investment opportunities easily available are not only an economic imperative but a strategic step toward the country's future", Lt. Gen. Dr. S.P. Kochhar, Director General, said.

Another major recommendation was reverting the license fee from 3 percent to 1 percent at par with administrative costs that the Department of Telecommunication and the government incurred. According to COAI, this would lighten their financial burden on TSPs to a great extent.

It also objected to the definition of gross revenue, saying that it was vague and needs to be defined clearly so as to keep the revenues from non-licensed activities out of the CHILDREN of GR. This clear definition, according to COAI, is essential for a fair financial assessment.

It has also asked for a special regime to be brought in by the government under Section 72 of the Income Tax Act, 1961, allowing carrying forward of business losses by Telecom Service Providers  and their setting off for 16 years instead of eight years at present. This would give much-needed sine respirator to those TSPs.

Besides, COAI has also sought exemption from service tax on incremental AGR liability that would arise because of the apex court's recent order. More specifically, the industry body sought relief on service tax payment relating to the period April 2016 to June 2017, and for various services issued in November 2018.

First and foremost, COAI recommended rationalization of customs duty to nil, which should increase with the gradual strengthening of the domestic manufacturing base for the promotion of the local telecom manufacturing ecosystem. This is to encourage indigenous production of telecom gear.

Lastly, the association has sought exemption of GST on license fees, spectrum usage charges, and spectrum acquisition fees to grant much-needed relief to the sector. All these, according to the association, are very essential measures for the sector's long-term sustainability and growth.

The recommendations of COAI thus come out at a very critical juncture for the sector, which is faced with huge technology investments and related financial liabilities. Should these measures find a place in the forthcoming policy, they can be a big booster for the sector, ensuring its continued growth and contribution towards the country's digital infrastructure.