Telecom Firms Seek Service Tax Waiver On AGR Dues
Bharti Airtel Ltd., Vodafone India Ltd. and Idea Cellular Ltd. sim card packs are arranged for photograph in Mumbai, India, on Monday, Oct. 19, 2015. (Photographer: Dhiraj Singh/Bloomberg)

Telecom Firms Seek Service Tax Waiver On AGR Dues

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Telecom operators’ body Cellular Operators Association of India has approached the finance ministry seeking waiver of service tax on adjusted gross revenue dues to be paid to the government.

The telecom operators have been paying service tax and then GST under the reverse charge mechanism on licence fees and spectrum usage charges made to the Department of Telecom for the period starting April 1, 2016.

The industry paid around Rs 6,600 crore between April 2016 to March 2017 in cash to discharge its output service tax liability, COAI said in a letter to the ministry dated July 17.

"Telecom Sector should not be burdened with Service tax liability due to incremental LF and SUC payable pursuant to the Supreme Court decision, as it is going through challenging times," COAI Director General SP Kochhar said in the letter.

When contacted, COAI did not comment on the matter.

The industry body's members include Reliance Jio, Bharti Airtel and Vodafone Idea.

The Supreme Court had in October last year upheld the government's position on including revenue from non-telecommunication businesses for calculating the annual AGR of telecom companies, a share of which is paid as licence and spectrum fees to the exchequer.

Kochhar said total service tax payable on licence fees and spectrum usage charges, even after considering incremental demand due to the apex court decision, would have been less than Rs 2,000 crore.

COAI said had the industry known about the incremental demand of LF and SUC, it would have considered the same for computing the amount to be paid under RCM.

Consequently, the output service tax liability paid in cash at that time would have reduced by a corresponding amount.

"The industry is a front runner in contributing to the Indian economy through payment of fees, taxes, generating employment etc. This will be evident from the fact that in the last 5 years, telecom operators have cumulatively paid service tax and GST of approximately Rs 2 lakh crore," Kochhar said.

According to COAI, in addition to the taxes,telecom players have paid regulatory fees in the form of LF and SUC of approximately Rs 87,000 crore in the last five years.

COAI said the telecom sector employs almost 22 lakh people directly and 18 lakh indirectly. It has the second largest private sector investment in infrastructure at about Rs 11 lakh crore.

"Considering the criticality of this sector to the overall economy and ecosystem, it should not only be secured from any adverse impact but be extended some consideration, specifically where the relief does not result in any loss of tax to the government," Kochhar said.

Also read: Supreme Court Asks Telecom Department About Spectrum Sharing In AGR Case

COAI said the industry debt as on March 31, 2019 stood at Rs 6.7 lakh crore. AGR has declined by about 14% from Rs 39,585 crore for the quarter ended March 2017 to Rs 34,136 crore for the quarter ended March 2019.

"The request to not enforce Service tax liability in the given case is also made on account of the fact that being revenue neutral, it does not cause any loss of tax to the government. If such Service tax is to be paid, it would further block the working capital," Kochhar said.

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