Faced with the threat of losing tax holiday due to the delay in starting operations, the Cellular Operators Association of India has sought a year's extension upto April 2005 for the unified access service licencees, who got the licences in the first quarter of 2004.
Under the existing provision, to avail the exemption from tax holiday, services should have commenced before April 1, 2004.
As part of its proposals for the 2004-05 Budget, COAI has said the process of obtaining frequency clearances from government and other agencies normally took up to ten months. Therefore, it was not practically possible to commence commercial operation by March 31, 2004.
"The absence of tax holiday will significantly affect the cash flow of these respective circles and the ability to repay the capital commitment. It would also increase the overall debt burden leading to increased costs and higher cost of services," it said.
COAI has also recommended exclusion of cellular phones from the 1/6 Scheme of Income Tax. In the 2002-03 Budget, the basic telephone and WLL services were excluded from the compulsory filing of income tax returns.
"If the cellular mobile phones are retained in the 1/6 criteria, this will discourage the use of this service and affect the government's objective of higher tele-density," COAI said.
COAI wants the government to introduce a zero-duty structure on the infrastructure equipment for the telecom industry from the current 16 per cent as none of these equipment are manufactured in India.
The telecom sector is highly capital-intensive and as funds requirement cannot be met by the existing available resources, "we need more duty concessions to meet the expected level of growth in the sector," COAI added.
It also called for necessary amendments to Section 10(23G) offering exemption to cellular operators on the condition that such infrastructure facility is approved by the Centre.