COAI urges govt to waive off Rs 20,000 cr taxes

The Cellular Operators Association of India (COAI) has written to the government, asking it not to levy service tax on AGR dues. The telcos have sought exemption under the Central Excise Act.

Two leading consultant companies are in complete agreement with COAI:

“The liability to pay service tax on licence fee and spectrum usage charges, if any, was with the telecom operators paying the licence fee to the government. Given that the SC has now confirmed the additional liability on licence fee and spectrum usage charges, the service tax paid is no longer a pass-through as credit of service tax paid can no longer be availed of in the goods and services tax (GST) regime.

In the (earlier) service tax regime, it would have been a cash-neutral exercise. Creating a liability of service tax on an industry reeling from accumulated credits and adverse cash flows will result in futile litigation. Representations have been made to the government to resolve this impasse,” said Bipin Sapra, tax partner, EY India.

“The issue is that the service tax paid would have been available as credit to telcos to be used against output service tax or GST. However, it’s not clear as to how this credit would now be available, given that GST was introduced more than three years ago,” said Pratik Jain, partner and leader, indirect tax, PwC India.

This waive-off is very critical at this juncture. With the industry having invested USD 130 billion till now, and already running late in launching 5G services, it is pleading that the government honor its commitment that its aim is not to maximize revenue out of telecom, but increase penetration.

Today the industry roughly pays 30 percent of the total amount on taxes, if GST, license fee and spectrum charges are included. It may be likened to the tobacco and alcohol (sin) industries, says Akhil Gupta, Deputy Group CEO, Bharti Enterprises Limited in a recent webinar.
CT Bureau