DoT wants cut in telecom levies
4 Mar, 2011, 02.50AM IST, Joji Thomas Philip,ET Bureau
NEW DELHI: Reduction of telecom levies, the key demand of the industry, is back on the communication ministry's radar.
A telecoms department internal note, reviewed by ET, calls for rationalisation of levies to be among the top priorities for the communications ministry. The department is also set to approach the finance ministry for a reduction or even an exception on the 10.3% service tax that consumers are charged on their mobile and landline bills.
Indian telcos pay about 31% of their total revenues towards different forms of taxes , which is among the highest in the world, against the global average of 17%, according to both government and industry estimates. Any reduction in levies will be a boost for the ultra competitive 14-player telecoms market that has been fighting stagnant revenues and plunging profits over the last 18 months due to the savage price war. According to DoT officials, the first step towards lower levies will be a reduction in the licence fee, which could be implemented from January 2012.
Sector regulator Trai had in May 2010 suggested that the licence fee be reduced gradually over the next four years to 6%. The regulator said the move would allow the industry to save about 6,442 crore, while adding that Bharti Airtel would see savings to the tune of 1,996 crore, while for Vodafone, the reduced licence fee would give it a benefit of Rs 1,387 crore.
At present, mobile phone companies share between 6-10% of their revenues with the government - the licence fee is highest at 10% for the metros and category A regions, which include lucrative states such as Tamil Nadu, Andhra Pradesh and Maharashtra among others.
In a separate development, Trai has initiated a study to the levies paid by mobile phone companies in India and benchmark it against other countries. It is not known if the telecoms department will use this input to rework the current tax structure for mobile phone companies.
Telecoms minister Kapil Sibal will also discuss the issue of a uniform licence fee with top executives of telecoms companies next month before seeking his ministry's approval to implement it, an official with direct knowledge of the development said.
Trai's proposal involved reduction of licence fee in metros from 10% currently to 9% in 2011-12, 8% in the year after, then 7% and finally at 6% in 2013-14.
In category A circles, where operators are currently pay 10%, Trai had suggested that this be reduced by 1% each year to be at 6% by 2014.