Budget 2025: Telcos bat for cut in levies, LTGs contribution in USO fund

The telecom services industry has batted for the abolition of levies and extension of carry forward of business losses to 16 years in its Budget wishlist, and argued that large traffic generators (LTG) should contribute to USO Fund/Digital Bharat Nidhi Fund.

It has pitched for a cut in licence fee, and suggested that the definition of gross revenue (GR) be made more precise by stipulating that the revenue from activities that requires no licence, would not be a part of it.

The suggestions are aimed at enhancing the financial stability of the telecom sector, COAI said in its recommendations.

"Considering the huge capital that Telecom Service Providers (TSPs) have to invest in the current scenario, especially for the deployment of 5G, COAI recommends that the Universal Service Obligation Fund (USOF) levy be abolished. Alternatively, the government may consider the suspension of the USO contribution of 5 per cent of AGR, till the existing USO corpus of over Rs 86,000 crore is exhausted," said the association whose members include Reliance Jio, Bharti Airtel, and Vodafone Idea.

COAI has also suggested that licence fee be urgently reduced from 3 per cent to 1 per cent, such that it just covers the administrative costs by the DoT/government "thereby relieving the TSPs from additional financial burden".

COAI believes that large traffic generators should take the responsibility of participating in the development of telecom infrastructure as they ride on the networks created by telecom companies, earn profits, but don't pay anything for creation of the infrastructure.

It has recommended that LTGs should pay to USO Fund/Digital Bharat Nidhi Fund and thereby contribute to the Indian Digital Economy.

Put simply, LTGs includes over-the-top platforms and streaming services.

COAI also said that the SC ruling on AGR dues had adversely impacted cash flow and projections of certain players in the telecom industry, and added that sizable capital investment requirement from time to time in tech and innovation, further adds stress to the sector.

"Existing provisions provided 8 years limitation to business losses, which may result in lapse of losses for those companies who have longer recovery journey," it said.

COAI urged the government to address the issue by introducing a special regime for the telecom operators under Income Tax Act, so that business losses can be carried forward and set-off till 16 assessment years from the existing eight.

It has also urged the government to reduce customs duties for 4G and 5G network products, as well as other related items to nil, till such time high-quality equipment is available domestically at competitive prices.

COAI has urged the government to clarify that service tax is not payable on incremental licence fees (LF) and spectrum usage charges (SUC) arising from the Supreme Court's AGR ruling.

"The telecom operators, as a matter of general practice, paid service tax on LF and SUC paid to DoT and availed full credit of the same. Levy of service tax today on the incremental AGR would be an unjust cost for the sector," COAI said, seeking a relief by way of exemption.

Further, suitable clarification on the same would prevent "unjust" financial burden on the sector and align with past exemptions provided under similar circumstances.

"As acknowledged by the government, the telecom industry is playing an important role in this enhancement and expansion by delivering affordable access and inclusion across the verticals in a horizontal manner," COAI Director General S P Kochhar said.

Thus, lowering levy burdens and promoting investment opportunities for the TSPs are not just economic imperatives, but also strategic investments in the country's future, he added.