Exempt telecom goods made in SEZs from basic customs duty: COAI

Says such exemption will lower the cost of telecom network

GSM industry body COAI has suggested that telecom goods manufactured in the country in special economic zones (SEZs) should be exempted from basic customs duty.

In its budget recommendations, COAI said manufacturers producing goods in SEZs meet the objective of 'Make in India'.

"Such exemption would lower the cost of telecom network while at the same time, supporting the "Digital India" project of the Prime Minister," Cellular Operators Association of India (COAI) said.

COAI also said any increase in rate of tax from current 12% (service tax) to a higher rate under GST would increase the cost of telecom service, an essential service for common man.

"A consultation process with trade and industry bodies should be initiated for GST, and a platform for such consultation should be formed," it said.

The body said in last year's Budget, exemption from payment of customs duty was withdrawn on import of specified telecom products without mentioning the specific name or description of the products.

COAI has requested that the specific names of these items should be stated, without which classification of goods have become ambiguous.

The industry body has also sought clarity on taxability of interconnect usage charges (IUC).

Currently, the issue of taxability of IUC is sub-judice whereas for international private leased circuit and satellite services, the judiciary in India has held that these are standard services and hence fee for same cannot be taxed as royalty under Indian tax laws.

However, Finance Act, 2012, retrospectively amended the definition of 'royalty' to include transmission by satellite, cable, optic fibre, or similar technology.

COAI said by virtue of this amendment, payments made by telecom companies, even for standard telecom services could be considered as 'royalty' by tax authorities, resulting in protracted litigation.

COAI suggested that "definition of the term 'royalty' should be reinstated with retrospective effect, as it was before the amendment in 2012, which is also aligned with international practice.