Plan to Im­pose Ser­vice Tax will Push Up Tar­iffs: Tel­cos

Levy will cost the in­dus­try .₹ 30k-cr & hit cos’ ex­pan­sion plans, they said 47-71%, 3,50,000

The Economic Times - - Companies - Our Bureau

New Delhi: Telecom com­pa­nies have warned that the finance min­istry’s pro­posal to im­pose a 15% ser­vice tax on all spec­trum al­lot­ments, in­clud­ing auc­tions and trad­ing deals, will cost the in­dus­try .₹ 30,000 crore in the first year, that could force car­ri­ers to raise tar­iffs. The move will not only make the cost of ac­quir­ing spec­trum higher by 47-71%, damp­en­ing the bid­ding in­ter­est in the up­com­ing auc­tions, it will also cut into the tel­cos’ cor­pus re­quired to ex­pand ser­vices like 3G and 4G, tel­cos have said in a let­ter to Finance Min­is­ter Arun Jait­ley on Mon­day.

“The pro­posed levy of ser­vice taxes on spec­trum, es­ti­mated at .₹ 30,000 crore (in one year it­self), in­dus­try wide, will ser­vice tax will not only make cost of ac­quir­ing spec­trum higher by

it will also cut into tel­cos’ cor­pus re­quired to ex­pand ser­vices like 3G & 4G

fur­ther push the in­dus­try tee­ter­ing to the edge of fi­nan­cial dis­tress,” Cel­lu­lar Oper­a­tors As­so­ci­a­tion of In­dia (COAI) said, rep­re­sent­ing con­cerns of the in­dus­try which was al­ready reel­ing un­der .₹ 3,50,000 crore of debt.

COAI rep­re­sents top tel­cos such as Bharti Air­tel, Voda­fone In­dia and Idea Cel­lu­lar, be­sides new­comer Re­liance Jio In­fo­comm.

“It is ev­i­dent that this in­cre­men­tal tax can­not be ab­sorbed,” the lobby group added, seek­ing a meet­ing with Jait­ley to present their case of lim­it­ing the pro­posed ser­vice tax to

im­pact abil­ity of tel­cos to par­tic­i­pate in up­com­ing auc­tions, while equally im­pact­ing govt’s Dig­i­tal In­dia pro­gramme

is al­ready reel­ing un­der

of debt

spec­trum trad­ing deals. It said some smaller play­ers could even face sur­vival chal­lenges.

Levy­ing 15% as ser­vice tax would im­pact abil­ity of tel­cos to par­tic­i­pate in the up­com­ing auc­tions, while equally im­pact­ing the gov­ern­ment’s Dig­i­tal In­dia pro­gramme and its at­tempt to in­crease ru­ral pen­e­tra­tion of data ser­vices.

“This will ma­te­ri­ally af­fect and dent abil­ity of oper­a­tors to bid in fu­ture auc­tions, while im­pact­ing some from a sur­vival per­spec­tive it­self,” the lobby group em­pha­sised.

In his Bud­get speech on Fe­bru­ary 29, Jait­ley pro­posed to de­clare the as­sign­ment by the gov­ern­ment of the right to use ra­dio-fre­quency spec­trum and its sub­se­quent trans­fers as a ser­vice — and not a sale of in­tan­gi­ble goods — on which ser­vice tax can be levied. COAI said all gov­ern­ment ser­vices have been made li­able to ser­vice tax to be paid by re­cip­i­ents with ef­fect from April 1.

The pro­posal is “un­in­ten­tion­ally puni­tive and is ev­i­dently re­sult­ing in ma­te­rial dis­tor­tion and dis­crim­i­na­tion to the in­dus­try,” COAI said.

The gov­ern­ment also pro­posed that the Cen­vat credit of the tax im­posed on such as­sign­ment be de­ferred over the du­ra­tion of the li­cense pe­riod.

COAI said that credit on spec­trum trad­ing deals should not be de­ferred, since that would be a fur­ther dou­ble whammy for the in­dus­try.

Ar­gu­ing that im­pos­ing the tax on spec­trum as­sign­ment, which was a sovereign func­tion, COAI said that the gov­ern­ment would be creat­ing a tax cas­cad­ing im­pact which will ad­versely af­fect oper­a­tors work­ing on thin­ning mar­gins and EBIDTA of 20%.

Pro­posed 15%

It would

Telecom in­dus­try

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