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14% drop in service tax collections on telecom
December, 12th 2007
Finance Ministry writes letter to industry body

The Finance Ministry has shot off a letter to a representative body of telecom service providers seeking industry data, including turnover, subscriber base, capital expenditure and taxes paid, for the last four years.

This move comes on the back of a perceived yawning gap between the actual service tax realised by the Government from telecom services in the first five months of the current fiscal and the tax revenues expected from an explosive growth in mobile subscriber base in recent years.

Official sources said that the issue of decline in service tax collections from telecom services was also raised during the ongoing pre-budget meetings with various telecom service related industry associations.

The actual service tax collections from telecom services during April-August this fiscal was about Rs 1,500 crore (both landline and mobile put together) and that the collections reflected a 14 per cent decline to the service tax collected under telecom services in the corresponding period last year.

The service tax collections on telecom services in the first five months do not seem to corroborate with the industry claims that mobile subscriber base was seeing unprecedented growth and crossed 25 crore subscribers and that average revenue per subscriber was about Rs 250 per month, a Finance Ministry official said.

Historically, telecom services had accounted for substantial share (nearly one-third) of the service tax collections pie of the Government. The letter has been sent to the Association of Unified Telecom Service Providers of India (AUSPI). Besides the regular data like turnover of the industry, number of subscribers, average revenue per month from a subscriber, the revenue department has also sought information on the capital investments made by industry, the Cenvat credit utilised by the telecom service providers and also the services outsourced.

Interestingly, the AUSPI has in its pre-budget presentation (for 2008-09) to the Finance Ministry made a case for lowering service tax on telecom services to 10 per cent or lower level. It has been claimed that lower taxes would lead to higher consumption of services and, thereby, larger collections for the Government.

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