Citing the countrys poor broadband penetration, Indian internet service providers (ISPs) have asked the government to exempt broadband services from levy of service tax for the next five years.

It has also made a pitch for a five-year income-tax holiday. India, with a poor penetration (0.16%) of broadband, should not levy 12.24% service tax (including education cess), the ISPs have told the government.

According to Telecom Regulatory Authority of Indias (Trai) figures, India currently has just under 2 million broadband connections. The country has also failed to meet the targets set by the Broadband Policy, which had envisaged 3 million high-speed internet connections by 2005.

The country is also unlikely to miss future target of 10 million broadband connections by 2007. The Internet Service Providers Association of India (ISPAI) has also sought a 100% depreciation for computers within the first year, and a similar depreciation on broadband customer premise equipment (CPE), including set-top boxes, modems, wireless Radios and routers within the first year.

Also the amount incurred for buying computer or laptop by employee (government or private) should be exempted from the income-tax on production of valid bill.

Further, all corporations, whether public or private, should be allowed to give Rs 6,000 per annum allowance to employees for broadband services access at home, they said, adding that this allowance should be removed from taxable income for the corporation. The same facility, ISPAI said, should be extended to self-employed professionals and individuals.

The association has also asked for tax holidays for organisations or even individuals who donate their PCs and other related equipment to institutions and schools, charitable organisations and local bodies while asking for a 100% exemption from Custom duty on goods imported by ISPs for providing broadband access.

The government should also recommend to all states to waive sales tax on goods and services that are transacted through electronic mode (e-commerce) for the next five years. The state governments should follow these recommendations with legislation to ensure proper execution.

Similar legislation should also go from the Centre to the state governments for waiver of entertainment tax, currently about 30% in certain states, levied on broadband subscriptions and entertainment services, if they are provided through a broadband or internet platform, ISPAI said.