We welcome the government’s overarching theme for Budget 2020-21 that will enable an aspirational India and it was reassuring to hear emphasis on digital inclusion and advanced technologies. However, it is disheartening to see that while the government hinges its aspirational and developmental goals on telecom infrastructure, the sector itself gets no support.
While a lot was expected, the Budget may have fallen short of that hope, despairingly so for telecom. Given that it is the backbone of economic growth, it is but natural that a slowdown here will have a lasting impact.
Various taxes, including 18 per cent GST, 8 per cent license fee and crushing spectrum costs, levied on the sector add up to be amongst the highest in the world, especially compared to other Asian countries. Even with a huge debt of Rs 7.7 lakh crore, the industry pays over `100 billion per year to the exchequer. If a large debt pile was not enough, thanks to the recent ruling of the Supreme Court on AGR, there is an additional burden close to Rs 1.1 lakh crore.
The Indian telecom industry has undergone a major transition where competition has led to consolidation. According to section 72A of the Income Tax Act 1961, an amalgamated company needs to hold three-fourth of the book value of the fixed assets of the amalgamating company for five years. This limitation restricts disposal of old inefficient equipment, restricting high technology-driven businesses from upgrading infrastructure by investing in newer technology. A relaxation here would play a critical role in furthering the Digital India initiative.
It was also requested that GST should not be levied on license fees, spectrum acquisition fees, and spectrum usage charge, as the sector has already accumulated massive input tax credits (ITC) resulting in blockage of working capital and amplifying operational challenges. The classification of spectrum payments, LF and SUC dues as “government services” is an anomaly seen nowhere else in the world.
Telecommunication towers and shelters are essential to ensure seamless connectivity. ITC is not allowed on towers and shelters and this leads to levy of tax. Measures should have been initiated to ensure that GST paid here is available as ITC.
The Budget proposed that New India will be driven by innovations where data will be the new oil. Linking 1 lakh Gram Panchayat to the existing Bharat Net program is helpful in achieving this goal. However, none of our key recommendations have been taken into consideration. While the government has got its heart in the right place, as far as a digitally empowered economy is concerned, linkage to the head appears to be missing.
It is equally imperative to pay attention to the nuts and bolts to achieve this aim. As the head and body are strengthened through a strong backbone with key intelligence flowing through, telecom should be seen for what it is: the backbone with a neural network driving India to take its rightful position as a leader in the Knowledge Economy.
‘AGR dues not included in Budget’
Department of Economic Affairs secretary Atanu Chakraborty clarified on Monday that the government has not factored in pending adjusted gross revenue (AGR) dues in the Union Budget 2020-21. The government estimates revenue of Rs 1.33 lakh crore under the communications head next fiscal. The SC has also not yet given a date for hearings on modificatory petitions filed by telecom firms on its earlier AGR judgement.