Ask an Expert - Telecom
Partner (Direct Tax), PwC
One of the contentious issues facing the telecom sector is the treatment of discount offered to the distributors on purchase of SIM cards/RCV, etc, from a tax deducted a source (TDS) perspective. The telecom companies treat this as a discount, while the tax department treats it as a commission subject to 10 per cent TDS. In the absence of that, the entire amount of discount is disallowed for tax purposes, and this entails other consequences. Considering that there is a divergence of views on this, the tax department should clarify that this is a discount, not a commission. If it wants to put a TDS rate, it should be 0.5-1 per cent, against 10 per cent. That is in line with the margins earned in the chain and can be collected by telecom firms at the time of receiving payments from distributors.