New ISD cos dial TRAI, say they pay tax twice
Double taxation structure is making it difficult for international carriers to compete against incumbent players such as VSNL, Bharti, Reliance and BSNL . Phones for '08
By Joji Thomas Philip, TNN |
NEW DELHI: International carriers such as British Telecom, AT&T and Verizon, all of whom have recently entered long-distance services in India (carrying STD, ISD voice traffic and data), have complained against double taxation structure.
This, they say, makes it very difficult to compete against incumbent players such as VSNL, Bharti, Reliance and BSNL amongst others.
Their logic: New entrants have to use the infrastructure of the incumbents, as they are yet to build up their own capacity.
Therefore, when these players buy bandwidth from existing operators, the 6% revenue share or licence fee is incorporated into the selling price.
This, they say, makes it very difficult to compete against incumbent players such as VSNL, Bharti, Reliance and BSNL amongst others.
Their logic: New entrants have to use the infrastructure of the incumbents, as they are yet to build up their own capacity.
Therefore, when these players buy bandwidth from existing operators, the 6% revenue share or licence fee is incorporated into the selling price.
| Also Read |
The new operator must then pay a revenue share on both the procured access services as well as any additional service effectively paying revenue share twice on the same component. This makes it very difficult to compete on a cost perspective with the existing integrated operators who need to pay revenue share only once, British Telecom (BT) said in its communication to TRAI.
These carriers have also been supported by the Asia Pacific Carriers' Coalition (APCC), which is an industry association of global and regional telecommunications carriers operating in Asia Pacific.
This industry association has told TRAI that the current method of calculating revenue share placed 'new entrants at a competitive disadvantage with more established Indian operators'.
The APCC has also sought that TRAI's intervention to address this issue.
Going a step further, US-based global major Verizon has presented TRAI with two business models the application of an excise tax or a value-added tax to help avoid double taxation.
ADVERTISEMENT
The models can be applied as follows: Under an excise tax regime, the 6% revenue share applies only to transactions where the service is provided to an end user. Intermediate or wholesale transactions where the purchaser is another carrier are not counted. Under a value-added tax regime, all providers would contribute on the basis of all of their sales; however, each carrier would be able to deduct the value of any telecom services it has purchased, the company explained.
Industry sources say that the regulator is unlikely to address this issue at present.
TRAI's current focus remains on coming out with recommendations on doing away with the access deficit charge levy, issuing guidelines for the third phase of FM radio, implementation of the mobile number portability amongst other issues.
ADVERTISEMENT
Besides, the issue of double taxation is not part of the ongoing consultation processes, the industry source added.Start a SIP with as low as ₹500 with ET Money App!
Download
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
ADVERTISEMENT
