COAI’s Rajan Mathews blasts at the disappointing Budget for telecoms

Rajan S Mathews, director general, COAI, said budget proposals for 2015-16 do not address the requirements of the Indian telecom sector.

“While a few proposals in the Union Budget may help growth of telecom and broadband, overall, the industry’s concerns and submissions have been left unanswered,” said Mathews.

Linking Jan Dhan program, Aadhaar and mobile telephony will be a positive step for the uptake of mobile payment services.

Reduction of Corporate Tax to 25 percent from 30 percent with removal of exemptions over the next four years will result in marginal benefits.

The Indian telecom industry would have appreciated a clear roadmap on the implementation of the reduction in corporate tax. The deferral of the GAAR provision by 2 years, and the abolition of the Direct Tax Code would also benefit the industry.

COAI director general Rajan Mathews on spectrum

The increase in Service Tax from 12.36 percent to 14 percent is negative, adversely affecting the consumers and making the services more expensive.

The enabling provisions for levy of Swatchh Bharat Cess have been introduced, which shall be treated as service tax. In case Cenvat credit is not allowed, the suggested cess at 2 percent would increase the effective service tax rate to 16 percent; which will be a huge cost for the telecom industry.

Reduction in the rate of withholding tax on royalties & fees for technical services would, to some extent, ease the financial burden on the industry.

The GST will be rolled out by 1st April 2016. The chief concern of the industry, that the increase in rate of tax from current 12 percent (service tax) to a higher rate under GST would increase the cost of telecom service, has not been addressed.

The Excise/customs duty on mobile phones has been increased from 6 percent to 12.5 percent. This is likely to dampen the pace of upgrade to smartphones which is key for data uptake.

COAI had suggested that the telecom goods manufactured in India in Special Economic Zones should be exempted from basic customs duty.  These manufacturers, including foreign companies, meet the objective of Make in India and are promoting domestic manufacturing.  Such exemption would lower the cost of telecom network.

The industry concerns on the issues of the need to reconsider the rate of 30 percent interest on delayed payment of service tax, and the need to lower the withholding tax rate on discount offered to Distributors have not been addressed to any extent.

editor@telecomlead.com