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Foreign satellite firms want finmin to reverse retrospective tax on royalty
July, 03rd 2014

In the run-up to the Budget, foreign satellite operators (FSOs) such as Asia Broadcast Satellite, AsiaSat, Astro, Measat and Thaicom have urged finance minister Arun Jaitley to reverse the retrospective royalty provisions and reduce the increased tax rate of 25% (up from 10%) levied by the UPA on satellite-based services in last two successive budgets.

The foreign satellite operators said the increase in royalty rates, which have been levied with retrospective effect, increases the satellite charges for Indian companies like broadcasters, Vsat operators and telecom companies who are using the foreign satellites due to an acute shortfall in Indian satellites.

The FSOs have also informed the finance ministry that if their plea is not considered, it may drive the policy-makers of other nations to adopt similar measures for taxing payments flowing into India from foreign jurisdictions.

While imposing the taxes on FSOs, the Indian tax authorities argued that the revenues earned from transmission services are liable to tax in India based on the ground that the customers of the FSOs are being provided the satellite equipment and the processes embedded therein on a “right to use” basis, and thus covered under royalty taxation.

However, FSOs claim that these revenues do not fall within the taxable definitions of the Indian tax laws, and therefore they should not be faced with any tax withholding since they do not have any physical presence in India.

FSOs said India is currently in a situation of severe shortage of domestic satellite capacity and Indian companies have no alternative but to rely on services offered by the international operators therefore India should reverse what they term as 'unjust' move that is 'contrary' to the internationally accepted principles of taxation, the FSOs said through their Hong Kong-based representatives--Cable and Satellite Broadcasting Association of Asia (Casbaa).

 
 
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