The Budget 2009-10 was a non-event for the Indian telecom sector. The industry was hopeful of the total levies on it being reduced. It further wished for more clarity on the 3-G auctions. But no clarity or details were spelt out on any possible dates for the much-awaited 3-G auction. The long awaited wishlist of the telecom sector went unaddressed in the Budget speech. According to a report by Angel Broking, the Indian telecom sector is amongst the most heavily taxed in the world, and estimates suggest that as much as 30% of a consumer’s typical bill goes towards taxes and levies.

“The Budget has overlooked the industry’s demand to rationalise multiple taxes currently being imposed on it at both the Centre and state levels. A case in point is the recent increase in VAT in Maharashtra on mobile handsets from 4% to 12.5%,” said D Shivakumar, VP and MD, Nokia India.

Increase in the minimum alternate tax (MAT) rate is a negative from the cash flow point of view, while extension of the credit period to ten years from seven years is a positive. The exemption from countervailing duty of 4% on accessories, parts and components imported for the manufacture of mobile phones, which was in force till June 30, 2009 has been extended by another year.

“The Budget was far from any relevance to the Indian telecom sector. No concrete decisions were taken on the 3-G front. The FBT provided by employers to their employees has been abolished. While this move is expected to be marginally positive for the sector, increase in MAT to 15% of book profits from 10% will nullify the benefit from reduction in FBT. This would negatively impact cash flows of companies in the sector,” said a Mumbai-based analyst.