TRAI suggests slashing telecom license fee to 6 percent

Indian telecom regulator TRAI has suggested in reducing the license fee rate to 6 percent from 8 percent.

In its recommendation to the Department of Telecommunications (DoT), TRAI said that the income from non-telecom activities and other income should be excluded while computing AGR.

The telecom companies have increased their scope of activities and started earning income from areas which are not related to telecom activities. Indian telecom operators are currently paying license fees on these incomes also.

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“These recommendations would help in reducing the license fee and spectrum charges outgo of the telecoms if the same is approved by the DoT. Slashing the license fee to 6 percent is a welcome step considering the huge sum of money paid by the operators upfront while acquiring the spectrum,” said Hemant Joshi, partner, Deloitte Haskins & Sells.

TRAI Licence Fees of Adjusted Gross Revenue

Full recommendations of TRAI

# TRAI recommends that the License Fee (LF) and Spectrum Usage Charges (SUC) should continue to be computed based on Adjusted Gross Revenue.

# Gross Revenue shall comprise revenue accruing to the licensed entity by way of all operations / activities and inclusive of all other revenue / income on account of interest, dividend, rent, profit on sale of fixed assets, miscellaneous income etc. without any set-off for related items of expense.

# TRAI recommends no changes in the existing definition of pass through charges (i.e. deductions) under different licenses to arrive at AGR for the computation of LF and SUC except the inclusion of access charges paid by TSPs providing international calling card services and toll-free charges.

# Spectrum Usage Charges should be levied on AGR of respective telecom services which use access spectrum in operations or providing services.

# The component of USO levy should be reduced from the present 5 percent to 3 percent of AGR for all licenses with effect from 1 April 2015. With this reduction, the applicable uniform rate of License  fee would become 6 percent from the present 8 percent of AGR viz. the 3 percent of LF that directly accrues currently to the Government will not change.

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# ISPs having AGR less than Rs 5 crore in a year shall pay license  fee of Rs 10 lakh or actual LF based on the applicable rate, whichever is less.

# The minimum presumptive AGR for the purpose of LF and SUC should not be made applicable to any licenses granted by Government for providing telecom services.

# TRAI said IP-I services may not be brought under the licensing regime.

# Accounting of deductions of pass through charges from applicable gross revenue (ApGR) to arrive at the relevant revenue base (i.e. AGR) for the computation of LF and SUC should be allowed on an accrual basis. However, in the case of service tax and sales tax/ VAT collected on behalf of the Government, deductions from revenue should be allowed only for the amount actually paid to the Government.

# Intra-circle roaming charges should not be allowed as deduction from ApGR for calculating AGR of the telecom service provider for the purpose of computation of LF and SUC.

# Steps should be immediately taken by the DoT to introduce a system of LfDS w.e.f. 1 April 2015 and develop an e-portal for submission of LF and SUC by 1 April 2016. TRAI also recommends that the transition to the LfDS system may be initiated at the earliest, by putting in place a system for electronic online filing of Licensees’ returns.

Baburajan K
[email protected]