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Telcos seek abolition of service tax on broadband usage
January, 25th 2012

In a bid to encourage uptake of broadband services, telecom companies have sought waiver of service tax on Internet services. They have also asked Finance Ministry to remove the need for showing PAN number while taking a new telephone connection.

Abolition of service tax on pure Internet/broadband services would make it affordable to end users, the Association of Unified telecom Service Providers of India said in its pre-Budget recommendations. All telecom services attract a service tax of 12 per cent at present.

To promote use of smart phones and tablets, the operators have sought an amendment in 7(vii) of Rule 3 to exclude the benefit arising on use of Tablets/ iPod/ Smart phone by the employee out of the ambit of perquisite since such devices are nothing but advanced version of laptops/computers only and provide the similar features and used as working tool by the employees.

Existing rule exempts laptops and computers but not mobile devices.

This amendment will ensure that the employees are not subject to tax for the benefit arising to them from the use of such tablets/ iPod /Smart phone, etc, which are smart working tools, the Cellular Operator's Association of India, said.

Mobile companies have sought rationalisation of levies and duties including a uniform annual revenue share to 6 per cent. Various studies have shown that a 10 per cent increase in mobile penetration leads to a GDP increase of up to 1.4 per cent. Lowering of levies can be a critical tool in the hands of policy makers to improve Tele-density and expand service, the COAI said.

This comes even as the Department of Telecom has proposed a uniform fee of 8 per cent of the annual revenues.


Telecom companies also want distributors to be exempt from paying service tax. Distributors facilitate distribution of telecommunication services for which they earn margins / remuneration. They are largely unorganized, small in size, individuals lacking knowledge for compliances and record keeping, the COAI said in its presentation to the Finance Ministry.

On the issue of requirement of quoting the PAN number at the time of taking a mobile connection, the operators said that this had become an inhibitor for spread of service as low-end rural subscribers may not have PAN number.

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