The telecom sector has witnessed many changes over the past few years: from price wars to intense competition to consolidation. While aggressive pricing of high speed data by some companies has left no option for the others but to join hands, intense competition and debt are among some of the common problems for many players in the sector. With the National Democratic Alliance (NDA)-led government set to announce its first full-year budget after returning to power in May, analysts will keenly watch any announcements on the telecom sector. Industry body COAI, whose members include Reliance Jio Infocomm, Vodafone Idea and Bharti Airtel, has recommended certain steps
Limitation of 15 years period should be removed to provide respite to companies to utilize their accumulated MAT credit.
"Over the years, MAT rate has risen progressively from 7.5 per cent to 18.5 per cent, with the current effective MAT rate being 21.54 per cent. On one hand, the increase MAT rate has increased the cash outflow of the industry and on the other, it has slowed down utilization of MAT credit resulting into accumulation of huge MAT credit (which at present can be carried forward for 15 subsequent years)," COAI noted in its Pre-Budget memorandum.
The rate under MAT should be reduced at a comparatively reasonable rate of 10 per cent in line with the reduction in corporate tax rate under the regular provisions of the Act, COAI noted. "Considering the economic stress of the telecom sector, there is strong possibility of MAT credit getting lapsed, resulting into permanent loss of duly paid taxes."
Here are some other recommendations listed by COAI in its pre-Budget memorandum:
- Section 197: Amendment to rule 28AA to provide that AO will not consider tax liabilities which have either been stayed by AO / appellate forums or for which adequate security is provided by the tax payer, for the purpose of processing LDC application.
- Exemption from GST on spectrum payment, licence fees, usage charge: Given the huge burden of taxes and regulatory levies on telecom operators and considering the fragile state of their finances, special benefit should be provided to telecom operators in GST by way of exemption on reverse charge for regulatory payments of LF, SUC and spectrum assigned under auction.
Meanwhile, the number of telecom subscribers in the country stood at 1,183.51 million at the end of March 31, 2019, according to data from telecom regulator TRAI. Of these, total wireless subscribers were 1,161.81 million, marking a decline of 1.83 per cent compared with the corresponding period a year ago.