Trai for tax sops for ISPs

Concerned about the country's failure to meet its broadband targets, the Telecom Regulatory Authority of India (Trai) today recommended a series of radical measures, including the exemption of service tax for Internet service providers (ISPs) to help increase penetration of high speed Internet connections in India.

The measures were essential as against the government's target of 3 million subscribers by December 2005, operators have managed a subscriber base of only 0.61 million by September this year, Trai said.

On local loop unbundling, the regulator said, "To ensure that infrastructure expansion continues through fresh investments, we will not insist on unbundling of new infrastructure less than five years old."

Trai asked the government to exempt ISPs from the 8 per cent service tax saying the move would bring down the cost of such services.

"The service tax levied on services that are used by ISPs in the delivery of their service to Internet and broadband customers should also be exempted," the regulator said.

Trai also asked the government to make it mandatory for all corporations to provide an allowance of Rs 6,000 per annum for broadband services and remove this amount from the taxable income of the companies. It wanted the same facility to be extended to self-employed professionals.

Trai said the government must recommend to all state governments waiver of sales tax on goods and services for e-commerce transactions for the next five years.

"This recommendation should be followed with a legislation to ensure execution by state governments," Trai said. It said state governments should also waive 30 per cent entertainment tax for services provided through the broadband platform.

The government has already rejected the regulator's earlier proposal for unbundling the local loop to accelerate Internet and broadband services.

"Considering the importance of local loop unbundling and fiscal incentives for broadband services, the authority has recommended to reconsider its proposals," Trai said.