Protest heat on telecom service tax proposal

The proposed 15% service tax on spectrum assignment and its cascading impact will impose additional stress on the industry

The Cellular Operators Association of India (COAI) has pleaded with the finance ministry that the proposal to tax the spectrum used by telecom operators will result in a burden of Rs 30,000 crore in one year and push the latter to financial distress.

It will also increase the cost of the service to citizens, "unnintentionally punitive and evidently resulting in material distortion and discrimination to the industry", their letter says.

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The proposed service tax (15 per cent) on spectrum assignment and its cascading impact will impose additional stress on the industry, whose combined debt was Rs 3.5 lakh crore at the end of 2014-15, about four times higher than in FY09.

"Internationally, typically sovereign functions are not taxed since they are not considered as economic activity and also taxing sovereign functions is extremely regressive. The impact of this regressive tax for developing countries such as India is far more punitive than in developed economies," it said.

The impact on the investible corpus of operators will mean challenges in introducing third and fourth-generation technology, the letter added. Further, this will hit the ability of operators to participate and bid in future auctions, COAI director-general Rajan S Mathews said in the letter.