Telcos seek customs duty exemption on 4G

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Telcos seek customs duty exemption on 4G

Telcos-4G

Phone companies have sought basic customs duty (BCD) exemption on 4G network gear to reduce overall 4G LTE network roll out costs, besides also seeking a cut in the withholding tax on discounts extended to prepaid distributors among key recommendations in the upcoming Union Budget.

“4G LTE network equipment should be exempted from 10.3% basic customs duty to reduce the cost of rolling out high-capacity data networks, which will be the arterial backbone of Digital India,” the Cellular Operators Association of India, which represents big telcos such as AirtelBSE 0.68 %, Vodafone India, Idea and Jio Infocomm, has proposed in its Union Budget recommendations.

4G LTE network gear, typically, includes base stations/e-Nodes, IT multimedia systems/soft switches, microwave networks, and associated packet network nodes.

COAI director general Rajan Mathews said telecom operators have also sought similar “BCD exemption on front-ending connectivity devices used for newage technologies like internet of things (IoT), machine-to-machine (M2M) communication services and smart cities”. Such connectivity devices, typically, include IoT hops/sensors, IoT-enabled medical devices, customer premise equipment, vehicle tracking systems to settop boxes. Separately, telcos have suggested that the applicable withholding tax ondiscounts offered to their prepaid distributors be cut to 1% from the present 5%.

Mathews said COAI has proposed rationalisation of withholding tax to 1% on discounts offered by telcos to their prepaid distributors as the latter are “not agents and earn very low margins”.

Tower infrastructure companies, in turn, have suggested that “telecom towers” be included within the scope of the definition of “plant and machinery” under the Central GST Act, 2017, to enable tower operators to get the benefit of input tax credits.

“Telecom towers are considered plant & machinery from direct tax and companies tax perspectives, and specific exclusion under GST law would be arbitrary and inconsistent with accounting and taxation principles,” said Tilak Raj Dua, director general of Tower & Infrastructure Providers Association (Taipa).

What’s more, inter-state movement of telecom towers under the current rules also leads to a cascading effect of GST, said Dua. Tower companies have also urged the finance ministry to extend the benefits of Section 72A of the Income Tax Act to telecom infrastructure providers to encourage consolidation.

Section 72A, typically, allows the accumulated business losses of an amalgamating company to be carried forward and be set off in the hands of the amalgamated company.

At present, carry forward of losses is limited to industrial undertakings that includes telecom service providers but not tower companies, said a senior tower industry executive.

Taipa, in fact, has urged the finance ministry to include telecom infrastructure service providers within the scope of the definition of industrial undertakings, to “ensure parity” with telecom operators, and in turn, enable them to “avail of the benefits of carry forward of business losses under Section 72A in cases of mergers and amalgamations”.

source by:-economictimes
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