Need more tax sops for telcos: DoT

Income tax holidays along with Indian IPR for 10 years has been proposed

The Department of Telecommunications (DoT) has suggested the Ministry of Finance consider more tax sops for telecom companies, especially manufacturers of telecom equipment and infrastructure providers, in the coming Budget.

In its recommendations to the revenue secretary, DoT has suggested the government offer income tax holidays to telecom equipment makers with Indian intellectual property rights (IPR) for 10 years to promote domestic manufacturing. At present, a 100 per cent tax holiday is given to telecom companies for a period of five years, while 30 per cent rebate is given for the next five years.

DoT has sought tax rebate be extended to all telecom companies. Currently, the benefit is restricted to telecom services, and infrastructure providers are not included. It has suggested telecom equipment makers be exempted from paying minimum alternative tax, or MAT. DoT has also proposed 100 per cent tax rebate for telecom tower companies on capital expenditure.

Also, it has suggested instead of offering incentives to companies on capacity expansion, it should be linked to IPR and research and development, which is about 50-60 per cent of value addition in the telecom sector.

To boost domestic manufacturing, DoT has suggested the government should impose import duty on telecom products which are not covered currently. These include voice over internet products, 3G and 4G access equipment, carrier ethernet switches or routers, soft switches which have come into existence with advancements in technology. Keeping in mind the government’s focus on creating broadband highways, DoT has suggested the abolition of 12.36 per cent service tax on internet and broadband services to make it affordable for the masses.

Among other suggestions, it has proposed deferred payment of excise duty on manufacturing of telecom equipment. There is no such provision at the moment. DoT has also recommended that the government should give deemed export status to telecom equipment that is manufactured in India to increase competitiveness of domestic producers with importers who pay zero duty.

See KPMG view on the Budget: mybs.in/9c3fa