The Cellular Operators Association of India (COAI), which represents telecom operators, has urged the government to exempt service tax on additional adjusted gross revenue (AGR) dues arising from the recent Supreme Court’s ruling.
The operators said service tax is not payable on incremental licence fee and spectrum usage charges (SUC).
Besides, they have sought custom duty exemptions on telecom equipment, which is currently at 20%.
“Levy of service tax today on the incremental AGR would be an unjust cost for the sector. Clarification on the same would prevent unjust financial burdens on the sector and align with past exemptions provided under similar circumstances,” COAI said in its recommendations for the Budget 2025-26.
According to telcos, the Supreme Court’s judgment on the methodology for calculating AGR payable to the government has imposed an additional financial burden on telecom service providers (TSPs). Prior to the introduction of GST, service tax was paid on AGR payments, with credit available for the same.
However, post GST implementation, the additional payment of AGR, combined with service tax, will make it a cost for telecom companies as no credit will be admissible to them.
The association has reiterated its stance on abolishing regulatory levies. It said the government should consider the suspension of the USO contribution of 5% of AGR, till the existing USO corpus of over Rs 86,000 crore is exhausted.
Further, the operators have urged the government to reduce license fee from 3% to 1%, so that it just covers the administrative costs by the DoT/government, thereby relieving their additional financial burden.
“Lowering levy burdens and promoting investment opportunities for the TSPs are not just economic imperatives, but also strategic investments in the country’s future. We hope that the government will take these proposals into account in the future budget and assist the businesses in overcoming these long-standing issues,” said SP Kochhar, director general of COAI.
The association has also urged the government to extend carry forward of business losses from 8 years to 16 years.