The Department of Telecommunications (DoT) has recommended to the finance ministry that tax benefits given to telecom service providers under section 80-IA should be extended from 15 years to 20 years. It has also recommended that new telecom operators should get tax benefits under the section.
Under section 80-IA, a telecom operator is entitled to 100 per cent exemption on taxable profits for five years and thereafter 30 per cent exemption on profits of next five years. The operator can choose this 10-year period from the initial 15 years, from the date of commencement of the project.
For other infrastructure sectors such as power, under section 80-IA, companies get 100 per cent exemption on taxable profits for the full term of 10 years in succession. The companies can choose the 10 years from the block of 20 years.
“Telecom sector has been growing at a high pace compared to other infrastructure sectors,” said a DoT official. “Therefore, telecom sector should be treated at par with other sectors such as power.”
Under existing provisions, only companies that commenced operations before March 31, 2005 get tax benefits under section 80-IA. DoT has recommended that the benefits should also be available to companies that commence operations before March 31, 2011.
In its pre-budget memorandum to the DoT, Cellular Operators Association of India (COAI) has said the annual revenue share part of the licence fee should be reduced to 1 per cent. The revenue share part of the licence fee varies from circle to circle and is 5 per cent (excluding universal service obligation charges) for category “A” circles, such as Gujarat, Tamil Nadu and Maharasthra.
“Telecom operators pay taxes and levies amounting to up to 30 per cent of revenue. The present structure of multiple levies should be rationalised,” said TR Dua, officiating director general of COAI.