Every year the Government gets about ₹40,000 crore from telecom operators but when it comes to the Union Budget this is one sector which has always been disappointed. This year too there was nothing for telecom companies even as they gear up for the spectrum auction to start on March 4.

“While a few proposals in the Union Budget may help growth of telecom and broadband, overall, the industry’s concerns and submissions have been left unanswered. With the Government’s thrust on the Digital India initiative, a more supportive budget was expected for the telecom sector,” said Rajan S Mathews, Director General, COAI.

COAI, the Association representing seven of the largest mobile service operators and the majority of telecom equipment manufacturers, as well as other communication services and product companies in India, said that the silver lining in the budgetary proposal for the sector was the linking Jan Dhan programme, Aadhaar and Mobile telephony. 

“This is a positive step as it recognises and encourages the role of mobile telephony towards facilitating financial inclusion and will enable well targeted cashless transfers. This will help in the uptake of mobile payment services,” Mathews pointed out.

 Reduction of corporate tax to 25 per cent from 30 per cent with the removal of exemptions over the next four years will only result in marginal benefits. However, the industry would have appreciated a clear roadmap on the implementation of the reduction in corporate tax. Deferring the GAAR provision by two years, and the abolition of the Direct Taxes Code will also benefit the industry.

But the increase in service tax from 12.36 per cent to 14 per cent is negative, and will adversely affect the consumers and make the services more expensive.  The industry’s concern on the need to reconsider the unreasonable rate of 30 per cent interest on delayed payment of service tax, and the need to lower the withholding tax rate on discount offered to distributors have not been addressed.

Sandeep Chaufla, Partner, Direct Tax, PwC India, said, “The key tax issue that impacts the sector is that interconnect, roaming charges, ILD, IPLC that a telco pays to international telco is subject to 25 per cent withholding tax unless reduced by treaty.

This withholding is generally passed on to the payer thus increasing the burden on payer. The Budget proposes to reduce the withholding tax rate to 10 per cent which is in line with rates provided in most of tax treaties, so this will benefit the sector.”

 

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