13 Expectations
The countdown to budget 2013 has begun and the telecom sector awaits the cushion of a rational tax environment, both at the national and state levels
The countdown to budget 2013 has begun and the telecom sector awaits the cushion of a rational tax environment both at the national and state levels
The countdown to budget 2013 has begun and the telecom sector awaits the cushion of a rational tax environment both at the national and state levels. The 13 key expectations include:
While selling pre-paid productsH most telecom operators enter into ‘principal-to-principal’ arrangements with the intermediaries. However the tax authorities often treat intermediaries as agents of telecom operatorsH thereby alleging that difference between the maximum retail price (MRP) and the price at which it is made available to the intermediary is in the nature of commission and accordinglyH tax at the rate of 10% should be withheld on the margin allowed
Reduction in TDS Rate:
to the distributor. This has resulted in unnecessary litigation and is causing financial hardship to telecom operators.
Amending the Definition of ‘Royalty’ and ‘Process’:
The Finance ActH 2012H (FA 2012) introduced retrospective amendment to the definition of ‘process’H which is now deemed to include transmission by satelliteH cableH optic fiberH or any other similar technology including uplinkingH amplificationH downlinking of signals. This may result in inclusion of payments made by Indian telecom operators to other service providers for international private leased line circuitsH satellite usage chargesH etc.
Tweaking Section 40(A)(IA) of the Income Tax Act:
Expansion in the definition of ‘royalty’ will lead to dis-allowances under section 40(a)(ia) of the Income-Tax Act for payments made by telecom operators in past years to non-resident service providers. The rationalization to section 40(a)(ia)H in FA 2012H has been made only with respect to payments made to residents. However the same should be made applicable to payments made to non-residentsH as well to ensure that litigation for Indian telecom operators could be reduced.
FurtherH Indian tax laws do not prescribe a statutory time periodI limitation for initiating withholding tax proceedings against a person who fails to withhold tax on payments to non-resident service providers. A reasonable limitation period should be made applicable for initiation of withholding tax proceedings under