In line with the many demands of various sectors of the economy from the upcoming budget 2023, the Cellular Operators Association of India (COAI also made recommendations to the finance ministry on Wednesday to improve the financial health of the industry.
COAI is the apex body that represents the telecom sector.
Lt Gen Dr SP Kochhar, Director General, COAI said, “Telecom is one of the highly regulated sectors in the country. In view of the heavy burden of taxes on telecom operators and the critical nature of the service to drive Digital India, a special benefit may be provided to telecom operators by way of exemption of GST on regulatory payment for LF, SUC and specified spectrum. under auction. This will provide adequate relief and help in the revival of the industry.”
The major demands made by the Telecom Industry are:
Regulatory Fee:
COAI has requested that the USO contribution of 5% of AGR may be suspended till the existing USO fund is exhausted and the license fee may be reduced from 3% to 1% at the earliest by the DoT/Government to cover only administrative costs % should be done.
The current definition of Gross Revenue (GR) includes revenue from all telecom activities. The term telecommunications activity is not defined but may include revenue from activities that are considered relevant to telecommunications activity. It is submitted that the definition of GR should make it amply clear that revenue from activities for which no license is required should not form part of GR.
Direct Taxes:
COAI has requested to introduce a special regime for telecom operators under section 72 of the Income Tax Act, 1961, wherein business losses can be carried forward and set-off for sixteen (16) assessment years from the existing 8 years can go. The deferment of business losses after eight years would be detrimental to the already crisis-hit telecom industry as the income during the recovery phase would be subject to tax outflow and other committed payments such as AGR related payments, spectrum related payments, etc.
COAI said that during the last few years, the Indian telecom industry has witnessed transformational changes including major consolidation among most of the telecom players as a measure to survive in the highly competitive market.
One of the conditions for carry forward of losses under section 72A of the Act is for the amalgamated company to retain 3/4 (75%) of the book value of fixed assets of the amalgamated company for a period of 5 years, which are high technology including telecommunication Places undue restrictions on well-operated businesses because they are required to regularly upgrade their network infrastructure through investment in new technology.
In the recommendations, the COAI has urged the government to reduce the holding limit from 75% of the book value of fixed assets to 50%, which should be held for a maximum of 2-3 years. It added that relaxing this condition would also create a supportive environment for the government’s Digital India initiative.
With regard to TDS u/s 195 of the Act on Interconnect Usage Charges (IUC) payments to foreign telecom operators, COAI recommended that the CBDT issue a circular/instruction not to impose any bar on IUC payments to other operators and clarify Holds that the provision of the domestic law cannot be read down. or is overridden by the provisions of tax treaties between two countries, unless the treaty is amended by both countries.
For TDS under section 194H of the Act, the industry has recommended issuing a clarification that trading margin earned by telecom distributors does not come under the purview of TDS provision. Keeping in view the lower margin earned by the distributors, a lower withholding rate of 1% instead of the present 5% may be prescribed for telecom distributors.
Indirect Taxes – Customs:
High customs duty on telecom equipment is hampering the cost-effectiveness of telcos. About 85% of telecom equipment in India is imported under Chapter Head 8517.
Basic Customs Duty (BCD) of 20% is imposed on import of most of the telecom equipment like Optical Transport Equipment/Network, IP Radio, MIMO/LTE products, Soft Switch, VoIP, PTN, MPLS-TP, etc., which inhibits the market doing. Cost effectiveness of telecommunication companies.
The industry body suggested exemption from levying BCD duty as it would be beneficial to import essential equipment, which would help in deployment and smooth roll-out of 5G in India.
Customs – Interpretive Issues:
COAI has requested to clearly define the different terminologies to be used in the Tariff/Exemption Notifications for different equipment to reduce disputes with the Department.
In the absence of clear classification for these, field officers are not allowing import of equipment at the respective applicable duty rate and charging higher rate of duty, resulting in unnecessary litigation. For example, Optical Transport Equipment, OTN Products, MIMO Goods, MP-TPLS Products, Subscriber End Equipment etc. have not been defined in the Tariff, leading to interpretational issues with the Department and resulting in higher rate of duty @ 20% (in lieu of 0 to 10% of the applicable duty), COAI said.
CBIC has issued a clarification clarifying to field units that no duty will be applicable to vessels laying cable beyond India’s territorial waters. However, payment of duty on vessels and cables etc. beyond territorial waters and up to EEZ is still being insisted upon by Customs units. It is requested that suitable clarification may be issued for activities relating to cable repair/installation works carried out in Exclusive Economic Zone (EEZ).
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Remission of erstwhile central taxes viz. Excise and Service Tax: CBIC last notified Amnesty ie SVLDRS in 2019. In the last 3 years, there has been a sharp increase in litigation under the Service Tax and Excise laws as well as the GST laws. It is pertinent that the backlog cases are disposed of in a fast-track mode so that the taxpayers can focus on cases under the GST law. It is, therefore, suggested that another amnesty scheme may be formulated to settle the past litigations relating to Excise and Service Tax.
GST:
To facilitate Ease of Doing Business, a centralized registration process has been recommended for industries spread across all 36 States/UTs. As an alternative, a centralized jurisdiction may be set up to handle the day-to-day affairs of the taxpayers.
COAI has also requested the government to facilitate centralized assessment, audit process for large taxpayer entities with turnover of more than Rs 500 crore and presence in more than 12 states/UTs. This will limit this facility to less than 1% of all corporates and ensure ease of doing business without loss of revenue to the government.
It is observed that some state units are questioning the claim of ITC on network equipment installed on towers. While there is ambiguity in the law with regard to eligibility of the credit when mobile towers and shelters are treated as fixed, the network equipment installed on the towers is mobile. As such, the provision under which ITC on immovable property is blocked cannot be made applicable to deny credit on network equipment.
Keeping this in view, COAI has recommended issuing a clarification so that ITC on network equipment installed on towers is not denied. The sector also needs a properly worded law to avoid ambiguity on availability of ITC on telecom towers, resulting in blockage of working capital.
Currently, GST is being paid by operators under the Reverse Charge Mechanism (RCM) on supplies made by the government, specifically on Spectrum Acquisition Fee, License Fee (LF) and Spectrum Usage Fee (SUC). The resulting Input Tax Credit (ITC) is creating a huge mismatch with external liabilities. For industry, this involves a huge cost of money for compliance, while for the government, it is revenue neutral.
COAI has requested that a suitable notification may be issued for exemption from levy of GST on Spectrum Acquisition Fee, LF and SUC. Alternatively, payment of RCM on Government services may be allowed from Input Tax Credit (ITC) balance. This will bring great relief to the entire industry.
It has been recommended to reverse the accumulation of ITC which is more than Rs 32,000 crore and is putting a huge financial burden on the telecom operators. As an alternative, this amount may be allowed to be adjusted against statutory dues payable or used as collateral against loans.
COAI said that the industry is hopeful that the recommendations of COAI will be taken into consideration by the GST Council.
COAI stated that it has made several other submissions to the Government, however, the above recommendations are the most pressing and critically needed by the industry for the purposes of ease of doing business and to work towards restoring this important and necessary financial health. Huh. region.
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