COAI Cheers Bud­get 2016 High­lights

Voice&Data - - CONTENT -

Spec­trum Trad­ing ser­vice tax al­lows tele­com com­pa­nies to claim CEN­VAT credit. The open­ing of 11 new Cus­toms, Ex­cise and Ser­vice Tax Ap­pel­late Tri­bunal (CESTAT) benches is a wel­come ini­tia­tive to re­solve over 1.3 lakh tax dis­pute cases pend­ing in var­i­ous courts. Fur­ther, the de­ci­sion to abol­ish 13 dif­fer­ent cesses un­der dif­fer­ent min­istries is a pos­i­tive step, although the pro­posed Kr­ishi Kalyan cess of 0.5 per­cent levied on all taxable ser­vices with ef­fect from June 1 (af­ter en­act­ment of the Fi­nance Bill, 2016) could im­pact the pre­paid busi­ness of the op­er­a­tors. En­abling pro­vi­sions for avail­ment of CEN­VAT credit of the said cess are also yet to be in­tro­duced.

Ex­emp­tion from Ba­sic Cus­toms duty has also been with­drawn on spec­i­fied telecom­mu­ni­ca­tion equip­ment [such as soft switches and Voice over In­ter­net Pro­to­col (VoIP) equip­ment namely VoIP phones, me­dia gate­ways, gate­way con­trollers and ses­sion bor­der con­trollers, Op­ti­cal Trans­port equip­ment; etc.].

As­sign­ment by Govern­ment of the right to use the ra­dio-fre­quency spec­trum as well as sub­se­quent trans­fers of as­sign­ment of such right to use would now be con­strued as ‘ser­vice’ and li­able to Ser­vice tax. Such li­a­bil­ity will not only in­crease cost of ser­vice but will also re­sult is huge cash flow is­sue for the op­er­a­tors.

It has also been pro­posed that CEN­VAT credit of Ser­vice tax paid on amount charged for as­sign­ment by Govern­ment or any other per­son of a nat­u­ral re­source (such as ra­dio-fre­quency spec­trum, mines etc.) shall be spread over the pe­riod of time for which the rights have been as­signed. De­fer­ring uti­liza­tion of

POEMPOE to be ap­pli­ca­ble from 1 April 2016 (AY 2017-18):20

Mech­a­nism to com­ply with the pro­vis vi­sions of the Act (i.e. com­pu­ta­tion of in­come, tre treat­ment of un­ab­sorbed de­pre­ci­a­tion, set off and carry for­ward of losses etc.) for the for­eign co com­pa­nies who be­comes res­i­dent of In­dia by vir virtue of POEM shall be pre­scribed. This is a re re­lief for In­dia-based tele­com com­pa­nies with glo global oper­a­tions. PA PAN not re­quired for for­eign com­pa­nies: Pro­vi­sions of sec­tion 206AA of the Act shall not ap­ply to non-res­i­dent com­pa­nies with ef­fect from 1 June 2016, sub­ject to the con­di­tion­scond to be pre­scribed. This may bring much needed re­lief to the In­dian tele­com op­er­a­tors while deal­ing with the non-res­i­dent tele­com com­pa­nies not hav­ing PAN in In­dia. Spec­trum pay­ments should now be amor­tized over the pe­riod for which the spec­trum re­mains in force. How­ever, this pro­vi­sion has a prospec­tive ef­fect. So am­bi­gu­ity re­mains on the fate of those spec­trum pay­ments which have been cap­i­tal­ized in the books of tele­com com­pa­nies as in­tan­gi­ble as­sets de­pre­cia­ble over 4-5 years.

Amor­ti­za­tion of spec­trum fees un­der sec­tion 35ABA: Lower tax rate for do­mes­tic com­pa­nies en­gaged in man­u­fac­tur­ing:

Op­tion of avail­ing lower rate of in­come tax of 25 per­cent by newly set up do­mes­tic com­pa­nies en­gaged in man­u­fac­tur­ing has been pro­vided. Th­ese com­pa­nies have to forego in­cen­tives (ac­cel­er­ated de­pre­ci­a­tion, in­vest­ment al­lowance, ex­pen­di­ture of sci­en­tific re­search etc). This op­tion shall pro­vide some re­lief to the tele­com hard­ware in­dus­try.

Lower rate of tax­a­tion for in­come from Patents:

In or­der to in­crease in­dige­nous re­search and de­vel­op­ment, a lower rate of tax­a­tion at the rate of 10 per­cent is pre­scribed for tax­a­tion of roy­alty in­come aris­ing on ac­count of patents de­vel­oped and reg­is­tered in In­dia.

Al­ter­nate Dis­pute Res­o­lu­tion:

High Level Com­mit­tee chaired by Rev­enue Sec­re­tary and mem­ber CBDT will over­see fresh cases where as­sess­ing of­fi­cer ap­plies the ret­ro­spec­tive amend­ment — specif­i­cally re­lat­ing to in­di­rect trans­fers. This is a one-time scheme of Dis­pute Res­o­lu­tion for on­go­ing cases un­der ret­ro­spec­tive amend­ment pro­vided the tax payer fore­goes its right to ap­peal on the dis­puted mat­ter.

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