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Telecom industry seeks reduction in license fees, duties on equipment from Budget

New Delhi [India]: Ahead of the first Modi 3.0 budget, the Cellular Operators Association of India (COAI), an industry body, on Wednesday listed several recommendations addressed to the Union Ministry of Finance.

The industry body sought exemptions on custom duties on telecom equipment, sexemption from GST under Reverse Charge Mechanism on payments made to DoT for license fees, spectrum usage charges, and spectrum acquired in auctions among other recommendations.

COAI also recommended that the license fee be reduced from 3 per cent to 1 per cent, relieving the telecom service providers from additional financial burden.

The much-awaited full Budget for 2024-25 is scheduled to be tabled on July 23 – the first Budget under Modi 3.0. The budget session of Parliament is scheduled to commence on July 22 and conclude on August 12.

Considering the huge capital that Telecom Service Providers (TSPs) have to invest in the current scenario, especially for the deployment of 5G, the industry body has recommended abolition of Universal Service Obligation Fund (USOF) levy.

Alternatively, it suggested that the government may consider suspension of the USO contribution of 5 per cent of Adjusted Gross Revenue till the existing USO corpus of approximately Rs 80,000 crore is exhausted.

COAI stated that it is also concerned over the definition of gross revenue (GR). According to the industry body, under the present definition revenue from all telecom activities is covered.

This, it argued, has created ambiguity because the term telecom activity is not defined clearly, so it may include revenue from activities believed to be incidental to telecom activity.

COAI thus recommended that the definition of gross revenue be made precise, stipulating that the revenue from activities for which no license is required should not be a part of gross revenue.

“We hope the government will consider these recommendations in the upcoming budget and help the industry navigate through these prolonged challenges,” said Lt. Gen (retd), Dr SP Kochhar, Director General, COAI.

Owing to the intense price competition in the market, the telecom industry in India has consolidated from over 10 companies in 2017 to three private and one public sector company.

Coming to customs duty, over the past 5 to 6 years, the government has gradually increased the customs duty on telecom equipment to 20 per cent, which the industry says significantly impacted the rollout of 5G services in India.

COAI has requested exemptions on customs duties for certain telecom equipment to alleviate the cost challenges associated with deploying this critical infrastructure.

“The industry body recommends that the customs duty be reduced to zero and then gradually increased depending on creation of ecosystem for manufacturing of telecom gear in India. Until high-quality equipment is available domestically at competitive prices, COAI urges the government to reduce customs duties for 4G and 5G network products, as well as other related items, to nil,” COAI said.

Faced with tight market dynamics, the telecom operators, Jio, Airtel, and Vodafone Idea, raised prepaid tariffs in a range of 10-25 per cent, invariably, a few days ago. 

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