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Sandeep Chaufla

Partner (Direct Tax), PwC

Topic: Telecom

One of the contentious issues facing the telecom sector is the treatment of discount offered to the distributors on purchase of SIM cards/RCV, etc, from a tax deducted a source (TDS) perspective. The telecom companies treat this as a discount, while the tax department treats it as a commission subject to 10 per cent TDS. In the absence of that, the entire amount of discount is disallowed for tax purposes, and this entails other consequences. Considering that there is a divergence of views on this, the tax department should clarify that this is a discount, not a commission. If it wants to put a TDS rate, it should be 0.5-1 per cent, against 10 per cent. That is in line with the margins earned in the chain and can be collected by telecom firms at the time of receiving payments from distributors.

What are the expectations of the telecom industry from the Budget on the Customs duty front?


One of the key issues for the telecom service providers on the Customs duty front is non-creditability of special additional duty paid at the time of import for service providers. Such a duty paid on import of telecom equipment becomes a cost for the telecom service provider. Currently, the duty is creditable to manufacturers and refundable for traders. So, only the service industry bears the cost of the duty paid. The industry expects that it should be removed or credit for it should be allowed to service providers. Additionally, for the telecom infra, as well as handset firms, the key issue for customs remains removal of concessional rate of duty on various goods (this has been restricted to only manufacturers vide recent changes to boost ‘Make in India’). The industry is strongly representing before the government to allow such benefits on imports as well. The wish list for the Budget includes extension of such benefits/concessions to imports.

A lot of incentivising is happening for start-ups using telecom as a platform. What about new ideas developing telecom infra? In what way can the govt incentivise new ideas that will facilitate better services, equipment and better reach at lower costs, to far-flung areas still out of the reach of telecom majors?


The government has adopted a much focused approach to promoting and incentivising new ideas. It recently introduced the ‘StartUp India’ scheme, which has proposed various incentives, including three years of tax and compliance breaks, cheaper and faster patent applications, a capital gains waiver if the money is reinvested in a similar venture, as well as easier exit for failed projects. To promote new ideas developing telecom as a platform, the govt may do the following: • Provide that all expenses incurred in developing an idea are allowed to be amortised on a deferral basis for tax purposes • Reduce or remove certain regulatory levies on telecom firms operating in rural areas • Make spectrum available for rural wireless deployments at reasonable costs • promote/incentivise infra sharing in rural areas to reduce cost