TMI BlogIMPACT OF BUDGET ON TELECOM INDUSTRYX X X X Extracts X X X X X X X X Extracts X X X X ..... IMPACT OF BUDGET ON TELECOM INDUSTRY - By: - Mr. M. GOVINDARAJAN - Budget - Dated:- 6-4-2016 - - The Telecom industry is key industry which earns income to the exchequer. The industry is piercing in the rural area. As on 31.01.2016, 1017.97 million wireless phones and 25.32 million wire lines, totaling 1043.29 million connections are working in India. The share of urban subscribers is 57.27% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the share of rural subscribers is 42.73%. This is not the limit and it is expected to grow still further. The number of broadband subscribers as on 31.01.2016 is 140.10 million. The value of mobile phone production in India is expected to cross ₹ 400 billion in 2016-17. It is estimated that over 30000 new jobs have already been generated in this industry in the past seven to eight m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onths under the Make in India initiative. The Government expects revenue of ₹ 989.95 billion from the spectrum auction, licence fees and one time spectrum charges in 2016-17. Therefore it is quite natural for the Telecom industry to expect more from the budget. In this article it is discussed whether the Finance Minister fulfilled the desire of the Telecom Industry. In his budget, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon ble Finance Minister proposed to declare the assignment by the Government of the right to use radio frequency spectrum and its subsequent transfers as a service and not a sale of intangible goods, on which service tax can be levied. But on the other hand the telecom companies had termed the budget proposal to levy service tax on spectrum allocation as punitive and unfair. The telecom co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpanies wants to withdrawn the said levy of service tax since the tax burden will be ₹ 77,000 crore on the reserve price of ₹ 5.36 lakh crore, by which the tariff will increase. This will not only affect the increase of customers but also have an impact on the Digital India initiative. The plan outlay for the Department of Telecom has been set at ₹ 58.65 billion. This is so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mewhat a marginal increase over the previous years. The present budgetary allocation to Department of Telecom includes- Rs.0.17 billion towards regulatory bodies TRAI and TDSAT; Rs.27.55 billion for USO Fund; Rs.3.03 billion for DoT projects; Rs.27.1 billion for Network for Spectrum Project. BSNL will receive ₹ 22 billion as a refund for the 4G and CDMA spectrum it has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... surrendered. MTNL will receive a total support of ₹ 4.28 billion, including a refund for the 5MHz of spectrum that it surrendered in the Delhi and Mumbai circles and refund of MAT and payment of interest on bonds. The countervailing duty and special additional duty were waived on charges, adapters, batteries, wired headsets and speakers for mobile phones. The import duties on import us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the making of such parts and components have also been removing. This waival has been received better in some corners indicating that the changes will help to build a robust component ecosystem in the country which is very important for making it a manufacturing hub. While the other corner it has been indicated that domestic manufacturing will attract only 2% excise duty while imports will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... face 29.441% duty. All the Government services have been made liable to service tax to be paid by recipient of service provider under Reverse charge mechanism with effect from 01.04.2016. The Government also proposed that the CENVAT credit of the tax imposed on such assignment be deferred over the duration of the licence period. The Finance Ministry has also proposed a new dispute resoluti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on scheme in cases of retrospective taxation, which allows tax arrears to be paid in lieu of interest. The Industry finds that this scheme will be a positive and should help reduce the litigation facing the industry. Deferment of applicability of POEM based residence test and other tax rationalization measures relating to processing of tax refunds, grant of stay of demand, etc. may have a positi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve impact on telecom industry. The Finance Bill, 2016 proposed to amortize spectrum fees rather than allow tax depreciation. The industry is of the view that this could result in ambiguity and litigation risks, thereby leading to a negative impact on the cash flow of operators. In the before period the industry looked at spectrum as an intangible liable for tax depreciation. Rationalizatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of withholding tax rate on commission from 10% to 5% should be seen as welcome step by telecom operators, although the expectation was that it would be reduced to 2%. The Government is planning to increase its efforts under the Digital India initiative. The Government wants to launch a new Digital Library Mission Scheme for rural India within next three years. It also proposes to create a d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igital depository for school leaving certificates, school and college mark sheets which would be a platform for storing the documents safety and enable anybody to retrieve the same easily. The Indian telecom players will play an important role in this area. The budget proposals will result the tariff upwards by the operators which may boost revenue. The spectrum transaction will play a signif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icant role in the strategies of small and large operators in terms of maintaining or improving their market standing. Encouraging the domestic manufacturing of telecom equipment and mobile handsets will assist the industry s transition to a data-led growth model. - - Scholarly articles for knowledge sharing authors experts professionals Tax Management India - taxmanagementindia - taxmanageme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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