Budget 2024: Duty relief, tax rebate on telecom wishlist

Budget Expectations: India’s top mobile carriers are seeking a customs duty waiver on 4G and 5G network gear in the upcoming Union Budget to lower high network rollout costs and accelerate expansion of telecom connectivity across the country.

The operators will also push for suspension of 5% of adjusted gross revenue (AGR) contribution towards the universal service obligation fund (USOF) till the latter’s Rs 79,638.31 crore corpus is fully utilised, according to a pre-budget wish list that will be sent to the finance ministry shortly.

They are also likely to seek a cut in licence fee to 1% of AGR — from 3% currently — along with tax rebates to get financial relief by allowing them to carry forward and set off business losses for 16 assessment years instead of eight currently.

“Over the past five to six years, the government has increased customs duty on telecom equipment to 20%, which has put an additional financial burden on telcos, impacting 5G rollouts. Till we have a local telecom gear manufacturing ecosystem that ensures availability of good quality equipment in India at affordable prices, customs duty on 4G/5G network products should be reduced to nil in the upcoming budget,” a senior executive with one of the top three telcos told ET.

He added that the government must prioritise telecom infrastructure development in the budget by reducing high regulatory levies.

The wish list is likely to be sent to the finance ministry through the Cellular Operators Association of India (COAI), the telecom industry lobby body representing top private carriers Reliance Jio, Bharti Airtel and Vodafone Idea (Vi).

Operators also want the government to back deployment of USOF corpus for building network/connectivity infrastructure in underserved regions across urban, semi-urban and rural markets, and not just in the rural areas. “Also, if it’s not immediately possible to abolish the USOF levy, the 5% of AGR contribution should be suspended till the existing corpus is exhausted,” said the executive cited above.

Other key demands include GST exemption under the reverse-charge mechanism (RCM) on payments relating to licence fee, spectrum usage charge (SUC) and spectrum purchases to ease financial strain by preventing further input tax credit (ITC) accumulation and releasing blocked working capital for operators.

“Exemption is being sought since GST payments in cash on a reverse charge basis has resulted in substantial accumulation of ITC within telecom companies, leading to a significant blockage of working capital that is causing substantial financial burden on these companies,” said another industry executive.

The top telcos also want the Centre to take steps for ensuring there is no confusion around the definition of gross revenue (GR) in telecom parlance, by ensuring it only relates to revenues garnered from activities requiring a mobile services permit.

“The present definition of GR includes revenue from all telecom activities. But `telecom activity’ is not clearly defined and may include revenue from activities believed to be incidental to telecom activity. Accordingly, the definition must make it abundantly clear that revenue from activities for which no licence is required must not be part of GR,” the first executive said.

Airtel, Jio and Vi didn’t respond to ET’s queries. COAI did not immediately respond to a request for comment.