These were the findings of a telecom users survey on the Perception About Government’s Revenue Generation Model, conducted by the Centre For Market Research and Social Development. The company conducted the study on a sample size of over 900 telecom users and operators across ten states in the country. The research concluded that the public is not aware of the revenue generation model and the cost components of the telephone bill are not understood by the users.
An average service tax of 12 per cent will result in a higher revenue generation for the Government since the demand for telecom services will pick up as a result of lowering of tariffs. However, a uniform service tax of 12 per cent may put a relatively heavier burden on individuals having comparatively low levels of income.
Also, commercial and official users are highly insensitive to the cost of the telephone services. The demand for telecom services in this segment is price inelastic. The resistance to any tariff increase from this segment is going to be minimal. However, the PCO (public call office) users are highly sensitive to cost and tariff changes. Any tariff reduction will lead to increase in telephone use through PCOs and an increase in the number of PCOs.
Therefore, in order to ensure equity, service tax should be allocated in a manner that the preferred segments take lesser burden and the segments, which are price inelastic, like the commercials users segment, take a higher burden. The graded service tax follows the 80:20 logic. This means that 80 per cent of the revenues are earned from 20 per cent of the consumers.
The study predicts that if the commercial segment pays 20 per cent service tax, the PCO segment pays two per cent service tax and the individual segment pays four per cent, then revenues accruing to the government through market expansion will be much more than the present level generated through revenue sharing method.