Attorney General advices DoT to amend Finance Act

The move will enable imposing cess on Spectrum usage charges for Swatch Bharat Kosh

The attorney general (AG) has advised the department of telecommunications (DoT) to have the Finance Act amended, if it wishes to levying a cess on telecom services for funding towards the Swachh Bharat Kosh.

Telecom is a recognised service and covered by the Finance Act. Service tax, education cess and higher education cess is being levied in line with the Act. One cannot include a third cess, on spectrum usage charges, through an executive order for the Kosh, a cleanliness fund, the AG has said.

“A legislative backing is required. Impost of tax/cess is strictly construed. Without a legislation, the impost will be without authority of law and contrary to Article 265 of the Constitution (which says no tax may be imposed without authority of law),” says his note.

At a cabinet meeting early this month, DoT was asked to examine the imposing of a cess on the spectrum usage charge (SUC) for the Swachh Bharat Kosh. The SUC is a fee cellular operators pay the government for using air waves. It ranges from three to eight per cent, depending on the amount of spectrum a telecom operator holds.

Prime Minister Narendra Modi’s Swachh Bharat Abhiyaan, ‘to clean India by 2019’, is expected to cost at least Rs 62,000 crore. According to the guidelines for Swachh Bharat Kosh, it was formed “to facilitate channelling of philanthropic contributions and corporate social responsibility funds" towards the Clean India mission.

Rajan Mathews, director-general, Cellular Operators Association of India, said: “Imposition of a cess will burden consumers and be against the government’s objective  of providing affordable service, specially when it is talking about increasing rural broadband and internet penetration.”

Hemant Joshi, partner at Deloitte Haskins & Sells, had earlier said, “The telecom sector is already under stress, and with the auctions (for spectrum) coming up, the balance sheet of companies will be further leveraged. Servicing the debt would put a strain on cash flows and profitability. In such circumstances, the government should consider providing relief to the sector, instead of imposing extra burden.”