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Global Net telephony service providers face tax query
September, 26th 2007
After Vodafone Essar, the tax authorities have now put global Internet-based long distance telephone service providers under the scanner to determine whether these companies are required to pay service tax in India.

The Directorate-General of Central Excise Intelligence has asked local Internet Service Providers to provide details including address, revenues, and bulk users of all such net telephony service providers in the country.

The Internet Service Providers Association of India had earlier approached the Department of Telecom pointing out that these companies were violating licence norms.

Prior to January 2006, all ISPs were offering Internet telephony at no cost but then the Government asked them to pay a fee to offer the service even as messenger-based telephony services such as Skype offer voice calls without any licence from India. Internet telephony services can be offered in India either by an ISP specifically permitted to do so or by a unified access service licensee. However, several service providers such as Skype, Net2Phone, Yahoo, and MSN, are providing Internet telephony services to people in India.

Most of these foreign service providers offer termination in Indian fixed-line telephones as well without paying any fee or tax to the Government on the revenues that they make from Indian consumers, said Mr Rajesh Chharia, President, ISPAI.

On the other hand, Net telephony service providers have maintained that they were not liable to pay any charges to the Indian authorities since they were operating from other countries where they are paying necessary taxes as per local laws.

`Loss to govt'

While DoT has not taken any action so far on this issue, the move from the tax authorities is being seen by the ISPs as a step in the right direction. "Such service offering is resulting in loss of revenue to the Government by way of licence fee, access deficit charges, as well as by way of service tax. We will provide all the details that have been sought from us," said Mr Chharia.

Senior DoT officials said that one way to discourage global net telephony players was to get Indian operators to start offering voice over Internet Protocol service.

None of the large telecom players have launched domestic net telephony despite this being allowed as part of their licence. On the other hand, Government has put stiff limitations on ISPs who want to offer Net telephony.
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