Telecoms gear up to spend more on Capex due to 10% duty

Indian telecoms such as Vodafone, Idea Cellular, Bharti Airtel, Reliance Communications, etc are gearing up to spend more on Capex (capital spending) in the wake of the 10 percent duty imposed on telecom products that fall outside the WTO pact — in the Budget 2014.

Telecom industry body COAI says 10 percent duty imposed on telecom products that fall outside the WTO pact will result in added Capex burden of Rs 1,000 crore, PTI reported.

COAI welcomed the budget proposals — presented by finance minister Arun Jaitley — like setting up of National Rural Internet and Technology Mission.

“Levy of this 10 percent duty will also result in an added Capex burden on the GSM industry of an estimated amount of Rs 1,000 crore, approximating 10 percent of the estimated value of import of goods i.e. Rs 10,000 crore, further affecting the already upset financial health of the sector,” said Cellular Operators Association of India (COAI).

The budget 2014-15 proposed imposing 10 percent duty on telecom products not covered under Information Technology Agreement (ITA) 1 of WTO to boost domestic production of telecom products.

India has signed ITA 1 as a member of World Trade Organisation (WTO) in March, 1997 which, analysts have said, has finished off the electronics manufacturing industry in the country.

Under this agreement, member countries should allow duty free import of products falling under eight categories covering telecom, computers and semiconductors like mobile phones and electronic chips.


The GSM telecom operators’ association said that deterring policy on import of equipment could adversely affect the performance of the networks, eventually resulting in poor quality of services for consumers.

COAI said while the industry appreciates efforts to boost the domestic manufacturing sector, it feels that this should be done in a manner wherein the required infrastructure and manufacturing capacity is facilitated, instead of discouraging imports through such rigid measures as 10 per cent customs duty on some telecom products.

“It is also pertinent to note here that presently, many of the items, which are critical for the networks, are not manufactured in India and are not even expected to be manufactured shortly,” COAI said in a statement.

The association appreciated allocation of Rs 7,060 crore for 100 smart cities, extension of a 10-year tax holiday to power projects that are completed by March 31, 2017, allocation of Rs 1,000 crore for the solar power and setting up of National Rural Internet and Technology Mission, among others.

The association expressed disappointment on the issue of retrospective tax amendment. COAI’s member Vodafone is embroiled in Rs 20,000 crore tax dispute with government due to retrospective tax amendment introduced by UPA government.

“We are disappointed that the government has not taken a bolder step in dealing with the retrospective tax measure. We hoped that the government would put an end to the matter by bringing closure to pending cases in light of the Supreme Court verdict,” said COAI Director General Rajan S Mathews.