Union Budget 2012-13 was keenly awaited by the Indian businesses and Foreign investors alike, largely to see whether the Finance Minister ( 'FM') chalks out a credible path for the reforms process and provide impetus to the Telecommunication sector, being the prime driver for the economical growth of the country.

No significant policy announcements have been made by the FM for the Telecommunication sector, except inclusion of fixed telecom network and telecom tower infrastructure for viability gap funding.

While outlining the direct tax proposals, the FM mentioned that his proposals for the financial year 2012-13 mark further progress in the direction of movement towards the proposals outlined in the Direct Taxes Code 2010 ('DTC'). There are several surprises in the form of various amendments proposed, some of which were particularly not anticipated in view of the report submitted by the Standing Committee on Finance ( 'SCF') of the Parliament on the DTC provisions on 9 March 2012. On the indirect taxes front, significant amendments have been proposed with the twofold objective of generating more revenue and moving closer towards the Goods and Services Tax (GST) regime.

The FM in his budget speech announced that the structure of GST Network has been approved by the Empowered Committee of State Finance Ministers and that it is expected to be operational by August 2012. This Alert summarizes key direct and indirect tax proposals impacting Telecommunication sector.