In a letter to Finance Minister, Cellular Operators’ Association of India (COAI) shared its concern about imposing 15% service tax on the spectrum used by the telecom operators. The proposal was found in the recent Union Budget 2016-2017.
According to COAI, a tax on used spectrum will directly affect the common man, as it increases the cost of provision of service. “The proposal to tax spectrum assigned by the government to the telecom operators which is an input to the operators is unintentionally punitive and is evidently resulting in material distortion and discrimination to the industry,” COAI stated in the letter.
“Internationally, typically sovereign functions are not taxed since they are not considered as economic activity and also taxing sovereign functions is extremely regressive. The impact of this regressive tax for developing countries such as India is far more punitive than in developed economies,” COAI pointed out.
COAI fears that such a move by the Government will affect the roll-out of new technology. Moreover, this will prevent the operators to participate and bid in future auctions while impacting some of them from a survival perspective itself, COAI stated. The letter was signed by the association’s director general Rajan S Mathews.