Telecom tariffs to fall with single levy regime

Telecom consumers got a mixed bag from the Budget, which on one hand proposed a single tax regime for telecom service providers and on the other brought mobile content service providers under the service tax net.

While the move to simplify the multi-farious levies paid by the service providers to a single slab could lower the overall tariffs for telephone services, the decision to bring content providers under the service tax net could make mobile value-added services such as ringtones, downloads and other entertainment-based applications dearer.

Currently, telecom operators pay up to 30 per cent of their annual revenues in the form of various levies, which include 10 per cent licence fee, 12 per cent service tax, 4 per cent spectrum charges and other State specific levies such as octroi and sales tax.

Panel to be formed

The Finance Minister, Mr P. Chidambaram, has asked the Department of Telecom to set up a committee to study the present structure of levies and make suitable recommendations to Government.

The Cellular Operators Association of India said that if the total levy is brought down by 5-6 per cent, it could result in much lower tariffs. However, the industry expressed concerns that no time frame has been set for the committee to make its recommendations.

Government's receipts from licence fee have been projected to increase from Rs 8,799 crore (Revised Estimates 2006-07) to Rs 9,902 crore (Budget Estimates 2007-08). There is also some cheer for more than 24 lakh PCO booth owners of State-owned Bharat Sanchar Nigam Ltd and Mahanagar Telephone Nigam Ltd who have been exempt from paying income-tax on the commission they earn.

The Budget also sought to underline Government's thrust on improving rural telephony by increasing the outlay for Universal Service Obligation fund from Rs 1,500 crore (RE 2006-07) to Rs 1,800 crore (BE 2007-08).

There's good news for telecom companies engaged in research and development. They will be allowed to deduct amount equivalent of one-and-a-half times of their investments for another five years. This provision was scheduled to end on March 31, 2007.

The use of bio fuels also got a leg up with the Government abolishing excise duty on such fuels. Cellular operators are increasingly deploying bio fuels to power their base stations and the waiver would reduce costs. However, the decision to bring renting of commercial property under service tax net will make it expensive for telcos to deploy their switches and base stations.

Mixed bag

Ringtones, downloads could get dearer as mobile content is brought under service tax

BSNL and MTNL PCO booth owners get income-tax relief on commission

Use of bio-fuels to power mobile base station gets a boost with excise duty waiver

Rural telephony gets more funding

Tax benefits for telecom R&D companies extended by 5 more years