Telecom Firms and Budget 2008-09

Abstract:

Telecom Firms in India are facing the burden of various forms of levies and tax which they want to be lessened in the Union Budget 2008-09.

Telecom industry wants a more transparent levy system through the promotion of a single levy. License fee is heterogeneous across the country which needs to be removed. In its place the telecom firms require a uniform license fee structure of 6% all over the country.

Introduction

Telecom Firms in India want Budget 2008-09 to address three glaring issues:-

• Need of a single levy system instead of multiple ones. This would usher in transparency in the same.
• Uniformity and scaling down of license fee on revenue share to a 6% level throughout the country.
• Reduction of Tax (various kinds).

Multiple Levy System to a Single one

Telecom Industries in India have to pay levy on various counts like service tax, license fee, octroi, entry tax, and many more. This makes the current levy system complex and less transparent. Hence, need of the hour is imposition of a single levy system which is easy to comply with and bears less administrative costs. Hence, budget 2008-09 needs to implement a more transparent levy system for Telecom firms.

Uniformity in License Fee

TRAI and DoT want uniformity in license fee which changes in accordance with the operation circle around the country. It has been observed that in India this license fee ranges between 6% to 10%. Challenge before the Budget 2008-09 is to take this rate to a 6% level, uniform across all states of the country.

Tax Reduction

Telecom Cellular industry in India pays highest amount of tax in the entire world. Thus, telecom industry wants the union government to reduce the burden of tax that they need to pay at the current time.

• On-an-average, telecom companies in India have to shell out around thirty percent of their revenue earning towards payment of levies. In comparison to it, cellular industry in other countries of Asia pays levy within the range 5% to 7% of their revenue. Hence, the entire telecom industry is looking forward to the Union Budget 2008-2009 for a cut in tax.
• CDMA cellular service providers’ association in India is demanding a reduction in their mandatory contribution of a telecom company’s revenue towards Universal Service Obligation Fund. This fund is meant for expansion of telecom facilities in rural areas of India. Cellular companies which provide CDMA facility want their contributions to be slashed down from 5% to 3% of their revenue.
• Association of Unified Service Providers of India (AUSPI) want the UPA government to abolish the service tax imposed on the telecom companies providing broadband and internet facilities in the Union Budget, 2008-2009.