"On the larger issue of need for a telecom relief package, a view can be taken by the telecom department based on their due diligence.
Industry body COAI on Wednesday asserted that there is an agreement among all operators on need for immediate relief on issues like cut in licence fee and spectrum charges, as well as release of GST input tax credit locked up with the government. The Cellular Operators’ Association of India (COAI) stressed that there is no divergence of opinion on pain-points like need for reduction in levies, and all industry players as well as the sector regulator Telecom Regulatory Authority of India (TRAI) have highlighted these issues. “On the larger issue of need for a telecom relief package, a view can be taken by the telecom department based on their due diligence.
On policy matters, government decisions ought not be based on majority or minority views but the facts of the situation,” COAI Director General Rajan Mathews told PTI. The telecom department can undertake a comprehensive exercise to determine whether or not the industry is under financial stress, Mathews said. The COAI had earlier also written to telecom secretary stating that industry be granted refund of accumulated input tax credit, as refund of unutilised credit is “widely accepted and prevalent concept” in other jurisdictions. “…and the same has been quite prevalent in India under the erstwhile Value Added Tax regime,” COAI said.
As much as Rs 30,000 crore is estimated to be locked up on account of GST payment under ‘reverse charge mechanism’. In the letter dated November 27, the COAI also demanded regulatory levies like spectrum payment, licence fee and spectrum usage charges be exempt from GST levy. “Exemption of telecom regulatory levies from payment of GST would ease overall working capital burden of telecom operators and would ease out cases of accumulation of credits,” the COAI said. The association said that of the accumulated GST input tax credit (ICT) of mobile operators, a significant portion is on account of spectrum and licence fee and spectrum usage charges related payment. In another letter to the Department of Telecom (DoT), the COAI has also demanded that 4G and 5G related network products along with Long term Evolution (LTE) products, and other equipments be exempt from customs duty.
This, said COAI, is critical given the “essential nature of these imports to meet the national vision of digital India”. Currently, the customs duty on these products stands at 20 per cent. “With the hike in customs duty for 4G/5G related network products, the operators will incur additional cost and this will be an additional burden as the industry is already debt-ridden and facing severe financial distress. Additional duty will result in more financial challenges in the long run,” the COAI said in the letter dated November 29. The telecom sector has been bruised by falling tariffs, eroding profitability, and mounting debt, in the face of stiff competition triggered by disruptive offerings of Reliance Jio, owned by Mukesh Ambani.
But a senior DoT official had recently noted that the government may find it “difficult” to respond to calls for relief package for the telecom sector given the differences among operators on financial stress. The official familiar with the ongoing parleys, had said action has been initiated for a way out on two of the concerns — review of import duties for telecom equipment and GST payments locked up with revenue department.
Without naming any particular company, the official had said while certain operators had expressed concerns on severe liquidity crunch in the sector and high spectrum payments, one of the key players had disagreed with the position. This polarisation reflected in the industry association’s representation to the government too.