Budget 2023 is just one week away, and since this will be Modi government’s last budget before the General Election in 2024, it is expected to be a growth-oriented one. The primary focus of the Budget is likely to be on job creation and investment-driven growth. The real estate sector may get a boost with some announcements to expand the current income tax benefit for housing. Additionally, some measures can be announced by FM Nirmala Sitharaman to stimulate rural spending and infrastructure development. Overall, with its focus on growth and development, experts expect that this Budget may have something for everyone. With the massive rollout of 5G picking up steam, the upcoming Budget could be the most important budget for the telecom sector.
What does the Telecom industry expect from Budget 2023?
The Telecom industry is seeking government support for the expansion of infrastructure, such as the rollout of 5G networks and the development of internet connectivity in rural areas. Additionally, it is also expecting tax benefits to encourage investment in the industry, and regulations that promote fair competition and protect consumer interests. The Cellular Operators Association of India (COAI), an Indian non-governmental trade association and advocacy group focused mainly on the telecommunications industry, has made some crucial recommendations to the government ahead of the Budget to help elevate the telecom sector.
For the unversed, COAI is the apex telecom lobby and counts Reliance Jio, Bharti Airtel and Vodafone Idea amongst its core members. Its associate members include Apple, Google, Facebook and Qualcomm’s Indian units. “Telecom is one of the highly-regulated sectors in the country. Given the huge burden of taxes and regulatory levies on telecom operators, and the critical nature of the service to drive Digital India, a special benefit may be provided to telecom operators by way of exemption of GST on regulatory payments of licence fee, spectrum usage charges and spectrum assigned under auction,” said SP Kochhar, director general, COAI.
COAI’s wishlist for FM Sitharaman for Union Budget 2023-24
Suspension, reduction of regulatory levies: Telecom companies currently have to pay 5% of the adjusted gross revenue (AGR) as Universal Service Obligation (USO) to the government. COAI wants this levy to be suspended till the existing USO fund is exhausted. It also wants the government to reduce the licence fee to 1% from 3%.
Clarification of services included in telecom activities: COAI has also asked the government to clarify the definition of telecom activities for the purpose of calculation of gross revenue. At present, the term “telecom activities” is not defined, and may include activities which are incidental or ancillary to the primary telecom services. The group wants the government to define telecom activities such that revenue from activities that do not require any licence should not be included for the computation of gross revenue.
Special tax regime for telcos: COAI has asked for the introduction of a special tax regime for the telecom operators under Section 72 of the Income Tax Act, 1961, wherein the business losses can be carried forward and set-off till Sixteen (16) assessment years from the existing 8 years. The organisation has asked the government to extend the period for carry forward of business losses for the telecom sector from the existing 8 years to 16 years. Additionally, COAI wants the rate of tax deducted at source (TDS) under section 194H of the Income Tax Act to be reduced to 1% from the existing 5% for telecom distributors.
Exemption of customs duty on telecom equipment imports: COAI has asked for exemption from the Basic Customs Duty (BCD) charges as it believes that this will be beneficial towards importing essential equipment, which will further help in the deployment and smooth roll-out of 5G in India. At present, a basic customs duty of 20% is charged on import of IP radios, LTE products, optical transport equipment and other telecom equipment. COAI has also urged the Central Board of Indirect Taxes and Customs (CBIC) to direct its field officers to not charge customs duty on cable-laying vessels outside India’s territorial waters
Centralised registration process: For facilitating Ease of Doing Business, COAI has urged for a centralised registration process for the industries having spread in all 36 States/UTs. It has also asked for facilitation of Centralised Assessment, Audit Procedure for large taxpayer units with turnover of over Rs 500 crore and presence in over 12 States/UTs
Govt should focus on R&D, innovation in telecom sector in Budget
According to Gaurav Gandhi, Founder and CEO of Echelon Edge Pvt Ltd, the telecom sector will continue to play a pivotal role in India’s growth story as a key enabler of growth and development. The nationwide rollout of 5G will be central to this growth in the next year. “We expect the government to minimise the import of several telecom-related components. The Government should focus on investing in R&D and manufacturing to boost the telecom sector. In this regard, incentive schemes to push the ‘Make in India’ drive for domestic manufacturing can help,” he said, adding that apart from that, incentive plans should be introduced for innovation along with a reduction in licence fees.
Gandhi also expects duty exemptions on key telecom equipment. Telecom sector also seeks input tax credits against GST paid on telecom towers. “We also seek a reduction in GST rates to reduce the financial burden on TSP/passive infrastructure providers. The sector also seeks stimulus packages from the budget for the penetration and proliferation of rural areas, Gandhi said. Incentives for promoting new technologies to increase efficiency for the sector are expected as well.