Telecom stocks in demand

Five telecom stocks rose by 0.28% to 5.84% at 11:34 IST on BSE after the finance ministry clarified that no service tax will be applicable for this fiscal year either on the airwaves assigned to operators, or the licence fee.

Idea Cellular (up 5.84%), Reliance Communications (up 1.04%), Tata Teleservices (Maharashtra) (up 0.76%), Bharti Airtel (up 0.53%) and MTNL (up 0.28%), edged higher.

The S&P BSE Sensex was up 120.12 points, or 0.47% at 25,746.87.

One of the issues raised by the telecom service provider was whether service tax is payable, on installments due after 1 April 2016, for spectrum assigned or auctioned to them in the past, the Finance Ministry said in a statement. It has been clarified that service tax payable -- whether in full upfront or in installments -- for assignment of right to use such spectrum has been exempted from service tax, the statement said.

Furthermore, services provided by government by way of allowing a telecom service provider to operate as a telecom service provider or use radio frequency spectrum during the financial year ended March 2016 on payment of licence fee or spectrum user charges, has been specifically exempted from service tax.

The government has also allowed telecom firms to claim credit for taxes in three years instead of the entire lifecycle of the spectrum but has stayed firm on the levy on future auctions.

The clarification was issued after a Budget provision made all government services including auctions taxable.

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