Budget 2021: Debt-laden telecom sector expects tax reliefs, lower licence fee

The cash-strapped telecom industry, which is battling with competitive pricing and Adjusted Gross Revenue (AGR) dues, has been pinning its hopes on the Union Budget 2021 to offer some breather. According to EY, the industry expects Budget to offer price support in the form of Goods and Service Tax (GST) exemption from regulatory payments such as license fee and spectrum usage charges (SUC).  

The debt-laden telecom sector, which faces blockage of capital in the form of GST input tax credits (GST ITC), seeks a refund of unutilised ITC of Rs 35,000 crore for planned investments in the upcoming spectrum auction and a probable rollout of 5G later this year, says EY. The industry has also demanded  removal of time limitation or an extension of the time for claiming MAT (Minimum Alternate Tax) credit, which remained unclaimed due to losses in recent years.

Cellular Operators Association of India (COAI), the body that represents telecom operators, has asked for a reduction in licence fee and SUC levies. At present, there are two components to 8 per cent license fee- Universal Service Obligation Fund (USOF) of 5 per cent and license fee of 3 per cent. COAI has urged DoT to reduce license fee from 3 per cent to 1 per cent, and USOF contribution down to 3 per cent, with an objective of removing these charges over the next 2-3 years.  

Among the world's cheapest and fastest growing market, India's telecom sector faces issues of soaring debt. Telecom companies owe Rs 1.47 lakh crore in additional statutory dues to the government, following the Supreme Court observation on AGR. They owe Rs 92,642 crore as licence fee, and Rs 55,054 crore as spectrum usage charges. Though the companies have made partial payment, substantial amounts still lay outstanding. Besides, the COVID-19 pandemic has thrown up new challenges, pushing the telecom operators to increase their network resiliency and reliability to deal with increasing data usage. The pandemic has led to an increase in demand for telecom services with work-from-home, remote education, home entertainment.  

In the backdrop of slowing economy and the telcos' planned investments, particularly in 5G, the telcos hope for an industry-friendly Budget.   

In the last Union Budget, Finance Minister Nirmala Sitharaman had more than doubled its revenue estimate from the debt-ridden telecom sector to Rs 1.33 lakh crore in fiscal year 2020-21, mainly on account of levies derived from AGR, license fees and spectrum usage charges.

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