Telecom budget expectations of Deloitte Haskins and Sells

Telecom Lead India: Budget 2012-13 should drive the
telecom sector to improve the GDP, to create opportunities for financial
inclusion, to facilitate the delivery of healthcare, education, banking,
governance and to improve the agricultural productivity in all parts of India
more particularly in the rural areas.

India has urban mobile penetration in excess of 100
percent while the rural penetration is only 36 percent. The country has more
mobile phones than schools, banks and hospitals. 


A 10 percent increase in mobile penetration boosts GDP by
1.2 percent in developing countries – GSMA.

Each 10 percentage points of broadband penetration
results in 1.38 percent increase in per capita GDP growth in developing nations – World Bank


Hemant Joshi, partner, Deloitte Haskins & Sells
shares his vision for Union Budget for 2012-13. 


The above research indicates that the quickest way to
meet the challenges in healthcare, education, banking, etc. and hence to
improve the Indian GDP is through the growth of telecom. This requires clarity,
certainty and predictability in the regulations and policies. Accordingly, aggressively
dealing with the following issues in budget will enhance prospects for telecom industry
in India:

1.       Granting telecom
industry the status of infrastructure sector

o   Tax holiday under section 80IA to be
restored to support massive investment which is being made for 3G and BWA

o   Similarly, the tax exemption under section
10(23G) to infrastructure capital companies / funds investing into telecom
companies should also be restored

o   Cheaper funding options from state-run

o   Funding from Indian Infrastructure Finance
Company Limited (IIFCL) equally extended to infrastructure based telecom

o   Resource pooling by inter-institutional
groups (IDBI, IDFC, ICICI Bank, SBI, LIC) to ensure speedy conclusion of loan
agreements and implementation of infrastructure projects

2.       Dedicating fiscal,
legal and regulatory incentives to indigenous telecom manufacturing

o   Reduce customs duty on raw material for
manufacture of telecom equipment, handsets, optical fibre, etc.

o   Reduce import duty on non-electronic parts
for manufacture of telecom equipment

o   Incentives for stimulating and mobilising
increased private sector investments through long-term financing schemes at
competitive interest rates

3.       Encouraging
rollout of telecom services in rural areas

o   Service tax exemption on internet and broadband
services in order to lower their costs and achieve the government’s objective
to increase penetration across India

o   Excise duty exemption to telecom
manufacturers for supply in rural areas

4.       Promoting R&D

o   Provide exemption from MAT to registered
R&D manufacturing houses

o   Income tax exemption for Indian Product
companies for a period of 5 years

o   Provide Deferred Excise and CST for 5 years
along with Export Credit Facility and Interest Subsidy to Indian Product and
Manufacturing companies

o   Incentivise global companies for setting up
R&D and manufacturing centres in Indiathroughappropriate fiscal and legal

5.       Clarity on tax
related and regulatory issues

o   Clarity on tax deduction for expenditure on
3G and BWA airwaves in the year it was auctioned, taxability of inbound
roaming, tax withholding on payments for interconnectivity charges, tax
withholding on discount on prepaid recharge vouchers,use of passive
infrastructure, availability of CENVAT credit on assets like towers, shelters

o   MAT rates to be rationalised

o   Accelerated depreciation benefits ought to
be extended to telecom service industries

o   Exemption from service tax on license and
spectrum fees after introduction of negative list based tax on services to be

o   Foreign currency amounts received from
overseas telcos in respect of international roaming subscriber using telecom
services in India to be considered as exports not liable to service tax

[email protected]