Being the stellar sector of the Indian economy, one of our key expectations from the Union Budget 2012 would be to formally recognize the telecom sector as an “infrastructure sector”. This is critical for achieving the objective of inclusive GDP growth by generating employment opportunities directly and indirectly, across the length and breadth of the country.
In contrast to the widely acknowledged contribution of telecom to India economic growth, the sector is itself burdened with multiple and high tax levies. These taxes account for as high as 30 per cent of telecom service revenues in India, which is significantly higher than what is suffered by our counterparts in other Asian economies. Relaxation of these levies can play a pivotal role in improving the industry's overall financial health, thus creating more room for funds to focus on reinvestment and expansion of services towards improved tele-density. In the same spirit, the Budget must be non-inflationary in nature.
Telecom has moved from becoming a luxury service to a necessity, thanks to the low tariffs and the cost efficiency being driven by the industry. In order to sustain this kind of growth, it is important that the Government allows more disposable income in the hands of the consumers. This will mean lowering taxes on telecom-related products — for example, smart mobiles phones over and above the range of Amount Rs 10,000 are charged with a higher VAT, our recommendation would be to bring down taxes on such like products to fuel growth in telecom sector. The telecom revenues should be shored up by increasing compliance and driving efficiency in government expenditure, measures such as introduction of negative list in service tax will have a positive impact on revenues but should be introduced with adequate clarity regarding implementation. Specific to telecom tax structure should be optimised through rationalisation of LF rates and prevention of multiple taxation as far as possible.
Telecom has moved from becoming a luxury service to a necessity, thanks to the low tariffs and the cost efficiency being driven by the industry. In order to sustain this kind of growth, it is important that the Government allows more disposable income in the hands of the consumers. This will mean lowering taxes on telecom-related products — for example, smart mobiles phones over and above the range of Amount Rs 10,000 are charged with a higher VAT, our recommendation would be to bring down taxes on such like products to fuel growth in telecom sector. The telecom revenues should be shored up by increasing compliance and driving efficiency in government expenditure, measures such as introduction of negative list in service tax will have a positive impact on revenues but should be introduced with adequate clarity regarding implementation. Specific to telecom tax structure should be optimised through rationalisation of LF rates and prevention of multiple taxation as far as possible.
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