India government may impose a tax on telecom services to create a corpus for funding the Swachh Bharat initiative.
The immediate impact will be increase in telecom tariffs across the country. India has nearly 900 million mobile subscribers.
Recently, several telecom operators – Bharti Airtel, Idea Cellular, Vodafone, etc. – have warned that they will be forced to increase the tariff if the government goes ahead with the spectrum auction in February at the approved base price of bandwidth by the Telecom Commission.
A PTI report said Attorney General of India has suggested the government not to levy Swachh Bharat Cess on telecom spectrum as it would be illegal. Cess can be imposed on Indian telecom services by amending the Finance Act.
“AG has said that it is not possible for the DoT to levy the Cess for the purpose of Swachh Bharat Kosh by way of an executive order. It will need legislative backing and impost of tax / cess is strictly construed,” an official source said.
AG has responded to opinion sought by the DoT if it is legally tenable to impose Swachh Bharat Cess on spectrum usage charges — a fee paid annually by telecom operators, through an executive order under the Indian Telegraph Act.
The report said the AG in his opinion stated that since telecom service is a recognized service and covered by the Finance Act on which service tax, education cess and higher education cess is currently levied, it would be appropriate to amend the Finance Act and include a third kind of cess.
COAI opposes additional tax
Telecom industry body COAI, which primarily represents GSM mobile operators, has opposed the tax.
“We are not in favor of it. It will burden mobile and telecom consumers. Any additional tax will be against government agenda of providing affordable service specially when it is talking about increasing rural broadband and internet penetration,” said COAI Director General Rajan S Mathews.
Indian telecom industry is waiting for the first full budget from the finance minister Arun Jaitely next month. The industry is hoping that the debt-ridden industry will have more support from the Union Government – headed by Narendra Modi as the Prime Ministry – to improve business conditions.
Usually, India never made any significant announcements to support the telecom industry through the annual budget.
Baburajan K
editor@telecomlead.com
