Telcos call for tax reforms in telecom sector in Union Budget 2024-25

COAI has restated calls to stop USOF payments, reduce customs duty on equipment

In their Budget recommendations to the Finance Ministry, telecom service providers have called for the introduction of a special regime for the telecom operators allowing them to carry forward and set off business losses for up to 16 assessment years, from the existing 8 years.

The Cellular Operators Association of India (COAI), which represents private sector telecom operators Reliance Jio, Bharti Airtel, and Vodafone Idea, said it may result in a lapse of losses for those companies who have a longer recovery journey.

"Cash flow and projections of some of the players in the telecom industry have also been adversely impacted post the Supreme Court ruling of 2019 in the context of the calculation of Adjusted Gross Revenue (AGR), whereby telecom operators are required to pay additional AGR dues based on the revised computation, over a longer period of time," it said.

Arguing that the sector requires periodic sizable capital investment due to technological advancement, COAI said it adds stress to the sector.

It has also pressed for an exemption from the service tax on the “assignment of right to use natural resources” and the slashing of customs duty on telecom equipment to zero. "Prior to the introduction of GST, service tax was paid on AGR payments, with credit available for the same. However, post-GST implementation, the additional payment of AGR due to the Supreme Court ruling, combined with service tax, will make it a cost for telecom companies as no credit will be admissible to them," COAI said.

The industry body has requested exemptions on customs duty on certain telecom equipment, which presently increases the cost of rolling out this critical infrastructure. Rising over a period of 5 to 6 years, duties have now hit 20 per cent.

The demand for the universal service obligation fund (USOF) to be suspended till the existing corpus is exhausted, and for the licence fee to be slashed to 1 per cent from the current 3 per cent, has also been restated.

USOF inflows come from the collection of Universal Access Levy (UAL) from telecom service providers who have to pay 5 per cent of their adjusted gross revenues yearly to the fund. As of December 31, a cumulative Rs 1.55 trillion has been collected by the government historically as UAL, official figures show. More importantly, the fund continues to have an unused surplus of Rs 79,638 crore as of January-end, reaching its highest levels ever.