Telecom industry wants govt to junk USOF, slash duties

Telecom services providers have urged the Ministry of Finance to suspend the universal service obligation (USOF) till the existing corpus is exhausted.

In their Budget recommendations, they have also pressed for an exemption from the service tax on “assignment of right to use natural resources” and the slashing of Customs duty on telecom equipment to zero.

The Cellular Operators Association of India (Coai), which represents private sector telecom operators Reliance Jio, Bharti Airtel, and Vodafone Idea, called for abolishment of USOF levy.

“Further, licence fee should be brought down from 3 per cent to 1 per cent at the earliest to cover only administrative costs by the Department of Telecommunications (DoT),” it said.

USOF inflows come from the collection of universal access levy (UAL) from telecom service providers who have to pay 5 per cent of their adjusted gross revenues yearly to the fund.

As on December 31, a cumulative Rs 1.55 trillion has been collected by the government historically as UAL, official figures show.

More importantly, the fund continues to have an unused surplus of Rs 77,113 crore, reaching its highest levels ever.

The Coai has requested exemptions on Customs duty on certain telecom equipment, which presently increases the cost of rolling out this critical infrastructure.

Rising over a period of five to six years, duties have now hit 20 per cent.

Currently, operators are paying goods and services tax (GST) under a reverse charge mechanism (RCM) on payment made to the DoT towards license fees, spectrum usage charges, and payment of spectrum acquired in auction.

“Payment of GST in cash on a reverse charge basis and subsequent input tax credit (ITC) utilisation has resulted in substantial accumulation of ITC within telecom firms, leading to a significant blockage of working capital and thereby, imposing a substantial financial burden on these companies,” the Coai said.

The industry body has also requested the introduction of a special regime for the telecom operators under Section 72 of the Income Tax Act, 1961, where busi-ness losses can be carried forward and set-off till 16 assessment years from eight years now.

The Coai has called for clarification of the definition of gross revenue, which currently includes revenue from all telecom activities.

“The term telecom activity is not defined but may include revenue from activities believed to be incidental to telecom activity.

"Therefore, the definition of gross revenue should make it abundantly clear that the revenue from activities for which no licence is required, should not be part of gross revenue,” the Coai said.