Like every year, Budget Session of the Parliament is one of the most awaited events for the India Inc. and the corporate houses will be eagerly waiting for some good news. What makes them more anxious this time is the fact that Union Budget 2018 will be the first budget presentation after implementation of GST and the second one after demonetisation. In the upcoming Union Budget, telecom sector is eagerly waiting for some breather given the fact that year 2017 has been a year of consolidation and steep fall in profit margins. According to Rajan S Mathews, Director General – Cellular Operators Association of India, following are the top 3 issues that telecom sector wants Finance Minister Arun Jaitley to address in Budget 2018.
Customs duty Exemption for LTE Equipment
The country cannot afford to lose out in the race of technological up-gradation of the entire eco system, which is the objective of the other equally important initiative of ‘Digital India’. The telecom sector is the biggest supporter of indigenous manufacturing. However, till such time as quality products at a competitive price are available in the country, the government needs to rethink its stand regarding customs duty on equipment, to ensure timely roll-out of networks.
Tax Withholding on Distributors’ margin on SIM cards and prepaid vouchers
The issue of tax withholding on discounts extended to pre-paid distributors needs immediate attention. It is important to understand and appreciate that the discount extended to pre-paid distributors is not a commission, as these distributors do not act as agents of telecom companies. However, in order to bring the ongoing litigation to an end, given the low margins earned by the distributors, a lower withholding tax rate of 1% may be prescribed for telecom distributors.
Taxability of Right of Way by local bodies
Government introduced the Right of Way (RoW) rules to standardise processes and fix charges regarding setting up telecom infrastructure including towers and optical fibre cables. But poor implementation and lack of clarity has only resulted into a number of litigation and disputes with the local authorities.