COAI urges Centre to reduce tax burden on telcos in Union Budget

NEW DELHI — The Indian telecom sector will get a boost if the Centre further reduces the tax burden in the upcoming budget to help enhance the financial well-being of the sector, the Cellular Operators Association of India (COAI) said on Wednesday.

In its recommendations on behalf of the telecom industry, the COAI said considering the huge capital that telecom service providers (TSPs) have to invest in the current scenario, especially for the deployment of 5G, the Universal Service Obligation Fund (USOF) levy should be abolished.

Alternatively, the government may consider the suspension of the USO contribution of 5 per cent of adjusted gross revenue (AGR) till the existing USO corpus of approximately Rs 80,000 crore is exhausted, the industry body noted.

“The telecom industry plays a pivotal role in this transition providing affordable connectivity and inclusivity. Thus, reducing the TSPs’ levy burden and facilitating investment opportunities are not just an economic necessity but a strategic investment for the country’s future,” said Lt Gen Dr S.P. Kochhar, Director General, COAI.

COAI also recommended that the license fee be reduced from 3 per cent to 1 per cent, so that it just covers the administrative costs by the Department of Telecommunication/government, thereby relieving the TSPs from additional financial burden.

“The industry is also concerned over the definition of gross revenue (GR). The definition of GR be made precise, stipulating that the revenue from activities for which no license is required should not be a part of GR,” said the COAI.

COAI also urged the government to introduce a special regime for the telecom operators under Section 72 of the Income Tax Act, 1961 wherein the business losses can be carried forward and set off for 16 assessment years from the existing eight years.

The apex telecom industry body also requested the finance ministry to exempt service tax on the additional AGR liability arising from the recent Supreme Court judgment.

Specifically, relief has been requested for the exemption from Service Tax payment for the period from April 2016 to June 2017, and on various services issued in November 2018.

The industry body also recommended that the customs duty be reduced to zero and then gradually increased depending on the creation of an ecosystem for manufacturing telecom gear in India.

COAI has also requested that the government exempt GST on license fees, spectrum usage charges and spectrum acquisition fees to provide much-needed relief to the sector.