Cellular Operators Association of India (COAI) has revealed the telecom industry’s recommendations for the Union Budget 2024-25.
SP Kochhar, Director General of COAI, said, “We hope government will consider these recommendations in the upcoming budget and help the industry navigate through prolonged challenges.”
Finance Minister Nirmala Sitharaman will be presenting the India Budget 2024-25 on July 23. India Inc is expecting significant incentives to support their business growth.
Bharti Airtel, the second largest telecom operator in India, posted a 31 percent drop in its consolidated net profit to Rs 2,072 crore for the quarter ended March 2024.
Reliance Jio, the #1 telecom service provider, has reported revenue of Rs 1,17,805 crore (up 10.2 percent) and net profit of Rs 20,372 crore (up 11.9 percent) for the fiscal year ended March 31, 2024.
Highlights of the recommendations
Abolish Regulatory Levies – USOF and AGR
COAI asked India to abolish Universal Service Obligation Fund (USOF) levy. Alternatively, the government may consider the suspension of the USO contribution of 5 percent of AGR till the existing USO corpus of approximately INR 80,000 crore is exhausted.
COAI also asked India to reduce License Fee to 1 percent from 3 percent in order to cover administrative costs by the DoT / Government.
The definition of Gross Revenue (GR) is a major concern for telecom operators in India since the present definition covers revenue from all telecom activities. COAI wants India to come with clear definition for the term telecom activity. COAI says revenue from telecom activities, for which the license is issued, should be part of the GR.
Extension of carry forward of business losses from 8 years to 16 years for telecom sector
COAI said India should extend carry forward of business losses from 8 years to 16 years for the telecom sector.
Indian telecom operators are under pressure due to the Supreme Court ruling of 2019 that demanded additional payment on Adjusted Gross Revenue (AGR) based on revised computation, over a longer period of time. Existing provisions provided 8 years limitation to business losses which result in lapse of losses for those companies who have longer recovery journey, COAI said.
COAI wants India to keep a restriction on dividend distribution as well.
“Dividend distribution within 5 years from date of utilization or set-off of unutilized losses by the company can attract additional dividend distribution tax of 25 percent (in addition to TDS), up to the amount of losses set-off by the company, on which no deduction or credit will be available to company or shareholder,” COAI said.
Exemption of Service Tax on additional AGR dues
COAI emphasizes the importance of exemption of Service Tax on the assignment of right to use natural resources” granted by the Central Government, State Government, and Development Authorities.
Supreme Court’s judgment on the methodology for calculating AGR payable to the Government has imposed an additional financial burden on telecom service providers. Prior to the introduction of GST, Service Tax was paid on AGR payments, with credit available for the same. However, post GST
implementation, the additional payment of AGR due to the Supreme Court ruling, combined with Service Tax, will make it as a cost for telecom companies as no credit will be admissible to them.
COAI urges India government to exempt Service Tax on the additional AGR liability arising from the Supreme Court judgment. COAI is looking for the exemption from Service Tax payment for the period from April 2016 to June 2017, and on various services issued in November 2018.
COAI says the Government can prescribe a streamlined, time-bound process for claiming a cash refund of the Service Tax paid under the Reverse Charge Mechanism (RCM), which would provide significant relief to the industry.
Exemption of Customs Duty
India has hiked the customs duty on telecom equipment to 20 percent over the past 5 to 6 years, adding financial burden on telecom companies and impacting the rollout of 5G services in India. COAI has requested exemptions on customs duties for certain telecom equipment to address the cost challenges in rolling our 5G infrastructure.
COAI wants India to reduce customs duty for 4G and 5G network products to zero and then gradually increase depending on creation of ecosystem for manufacturing of telecom gear in India.
Exemption of GST
Telecom operators pay GST under RCM on payments made to DoT for License Fees, Spectrum Usage Charges, and Spectrum acquired in auctions. This payment, combined with subsequent Input Tax Credit (ITC) utilization, has led to a substantial accumulation of ITC within telecom companies. As a result, there is a significant blockage of working capital, imposing a heavy financial burden on these companies.
COAI said telecom operators are seeking an exemption from GST under RCM on these payments. This will alleviate the financial burden by preventing further ITC accumulation and releasing blocked working capital.
COAI has requested India to exempt GST on License Fees, Spectrum Usage Charges, and Spectrum Acquisition Fees to provide relief to the sector. COAI proposes allowing the payment of RCM on Government Services through the utilization of the ITC balance available in the Electronic Credit Ledger.
Custom Duty Exemption for Cable Repair/Installation Operations in EEZ
Telecom companies rely on submarine cables for transfer of data around the globe. The current customs duty exemption for vessels engaged in laying submarine cables in India is set to expire on September 30, 2024. The government must intervene to extend this exemption to prevent increase in cable-laying costs.
