Cellular Operators Association of India (COAI) plans to lobby the government to treat levies such as spectrum usage charges and license fee paid to the Department of Telecommunications (DoT) as tax so that operators can claim input credit.
The industry lobby plans to rope in a top consulting firm to work on the details of the proposal and will then take it to the Telecom Regulatory Authority of India (Trai).
“It will be an elegant way of addressing the issue without having to redefine AGR (adjusted gross revenue). We will have to sit and work out the mechanics...legally and otherwise what does it mean when we classify this as a tax, what is the process, how do the mechanics work in a GST-like environment,” said Rajan Mathews, director general, COAI.
Adjusted gross revenue (AGR) is the basis on which DoT calculates levies payable by operators and has been a bone of contention in the sector. The matter has been under litigation as operators argue that AGR should comprise only revenue from telecom services but DoT insists that AGR should include all revenue generated by an operator, including that from non-core operations. Telecom operators are liable to pay around 3-5 percent and 8 percent of the AGR as spectrum usage charges and license fees, respectively, to DoT.
“Once you go to this particular methodology (treating the levies as tax) , only telecom associated revenue gets taxed. The original intent of the license fee is that revenue from telecom gets taxed,” Mathews said.
The industry lobby also believes that operators will be able to benefit from input tax credit if the proposal is accepted by the government.
“Once it becomes a tax on the operator, he pays it in the first instance, but he can then also then offset for any other thing that other operators (or third parties) have charged him for,” Mathews said.
Even if TRAI accepts the proposal, it will have to be approved by DoT, finance ministry, the Union Cabinet and the GST Council.
“There is one nation-one tax regime now, that is the GST. The finance ministry will find it difficult to accept such a proposal,” a telecom analyst said on the condition of anonymity.
“We will have see the nuances of the proposal but if it means the levies become a part of the GST, it could result in lower revenues for the government because it will pay have to pay input tax credit to the operators,” a taxation analyst at a consulting firm said on the condition of anonymity.
Meanwhile, Trai, as part of its recommendations on the proposed new telecom policy, has suggested the DoT quickly resolve issues related to gross revenue and adjusted gross revenue which are being litigated in various forums.
“A review of gross revenue and adjusted gross revenue would assist in enhancing clarity and removing ambiguities,” Trai said in its recommendations made public on 2 February.
Trai also said that there is a need to review the rates of levies paid by operators -- the licence fees and spectrum usage charges -- since access spectrum is now being assigned through auction, and telecommunication networks have become the underlying infrastructure for growth of the digital economy.
Operators, facing stress on their revenue streams due to increased competition after the entry of Reliance Jio Infocomm Ltd, have pitched for a cut in these levies. – Live Mint