Tax proposal on spectrum will put telecom industry at risk

New Delhi, May 12 (IANS) The proposed 15 percent service tax on all spectrum allotment by the Centre and spectrum transactions between licensees will place the telecom industry in a precarious financial position, industry body Assocham said on Thursday.

In a statement issued here, the Associated Chambers of Commerce and Industry of India (Assocham) said it was conveyed to Finance Minister Arun Jaitley in a letter on May 10.

“Service tax on spectrum assigned by the government to telecom operators is detrimental to the industry’s growth while increasing the cost of service and thus directly impacting the common man,” the letter stated.

“In fact, the National Telecom Policy of 2011 lays emphasis on affordability and accessibility,” it added.

The letter was written by D.S. Rawat, secretary general, Assocham, and P. Balaji, chairman, Assocham National Council on Telecom.

According to Assocham, the proposed tax will put at risk major government initiatives like ‘Digital India’, ‘Smart Cities’ and rural penetration of data connectivity and services.

The industry body urged the minister to restrict the proposed service tax to only transactions involving spectrum trading between private operators, adding that the credit on such transactions should not be deferred.

“The increase in spectrum cost will impact the sector’s health and adversely impact the investment corpus of telecom operators, leading to challenges in rolling out new technology and networks like 4G,” Assocham added.

“Further, this will materially affect and dent the ability of operators to participate and bid in future auctions, impacting some of them from the survival perspective as well.”

Assocham said the country’s telecom industry is already burdened with heavy debt, highest taxes and levies, thin operating margins and spectrum prices, that are at least 130 percent of the global norms.

The additional taxes proposed in the 2016 general budget will only force the industry to increase tariffs and thus impact the entire population.

The industry body highlighted that assignment of spectrum is a sovereign function and is not considered as an economic activity globally, and as such is not liable to tax.

“The impact of this regressive tax for developing countries such as India is far more punitive than in developed economies,” Assocham said.

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