Telecom industry moots graded service tax

The telecom industry on Saturday mooted the concept of levy of graded service tax on telecom services on the principle of ability to pay.

The low end users can be exempted from the service tax and the high end users can be asked to pay more according to their ability.

This according to the industry if implemented will generate more revenue for the government than the existing resources from the revenue sharing arrangement along with the service tax.

This emerged at a round table in New Delhi on Telecom evenue generation: A new approach, organised by the Telecom Users Group of India, an NGO which promotes consumer interaction with the industry and the government for the benefit of the telecom consumers.

The participants in the events included R K Takkar, former chairman, Telecom Commission, J S R Subhramaniam, telecom consultant, Virat Bhatia, MD AT&T, Umang Das of the Cellular Operators Association of India and A M Joshi, vice-president, TUGI.

The experts said the proposal could facilitate abolition of existing revenue sharing principle, which will reduce the cost of telecom services benefitting the consumer by way of lower tariffs.

This model for graded service tax net will be elaborated in details in different scenarios of tele density, telecom tariffs and customer profiles.

A detailed exercise in this regard will be carried out for establishing the feasibility for consideration and implementation of the government.

The proposal to be converted to a policy will require endorsement by the Parliament as a necessary amendment to the service tax act is involved.

A criticism of the service tax option is that the consumer has to pay extra service tax to meet the revenue requirements of the government.

In it's favour is the fact that as low end subscribers will not be saddled with the service tax, this will also contribute to increased usage of telecom services leading to a higher teledensity.

At present, the license fee payment acts as a deterrent for the financial institutions to consider telecom projects as viable propositions and hence, financial closures are difficult. The removal of the license fee will obviate this reluctance.

The National Telcom Policy'99 introduced the concept of revenue sharing for the licence fee. New licenses under this policy are issued on the basis of the annual revenue share fixed by the government.

Even the old licencees of cellular and basic services were allowed to migrate to the revenue sharing formula, and now all licences are based on it.

Around 80 per cent of the total revenue of Rs 350 billion is earned from about 20 per cent of the subscribers.

UNI

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