Ahead of Budget 2022, telecom operators have sent their recommendations to the central government. Telecom operators want the government to refund input tax credit (ITC) of around Rs 35,000 crore, reduce taxes, and waive GST on licence fees and spectrum usage in the upcoming budget.

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Vodafone Idea, Bharti Airtel and Reliance Jio are members of telecom industry body COAI, which has put forth the recommendations. To reduce the burden on service providers, the telecom industry wants the government to suspend the universal service obligation fund (USOF), which financially supports the rollout of telecom services in rural areas.

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COAI demanded a refund of unutilized ITC of Rs 35,000 crore, which cannot be utilized soon. The current market dynamics have led to accumulation of ITC, it added.

To achieve the vision of Digital India and further enhance customer experience there will be a significant increase in capital expenditure which will further increase borrowing by the industry, said COAI.

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Currently, telecom operators pay 8% of the revenue earned from telecom services, technically called adjusted gross revenue (AGR), as licence fees. The government has removed several revenue heads that were part of AGR, including spectrum usage charges (SUC) on radio waves that will be purchased in future auctions.

The industry body appreciated the government for its forward-looking structural and procedural reforms. It added that the reforms will bring stability and sustainability to the industry and facilitate the digital needs of  citizens

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“The telecom industry needs investment in robust and reliable communication infrastructure to meet the rising demand for connectivity. There is an urgent need to reduce the burden of levies on the sector,” COAI Director General SP Kochhar said.

COAI requested the government to reduce licence fees from 3% to 1% and reduce the SUC rate on  spectrum acquired in past auctions by 3%.

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At present, the licence fee is 8% of AGR, which includes a 5% charge for the USO Fund. The existing USO Fund corpus worth Rs 59,000 crore is sufficient to meet USO objectives for the next few years. Contribution to the  USO Fund could be suspended till the existing corpus is utilized, said COAI.

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The industry body also sought exemption of basic custom duty (BCD) on telecom equipment. It said around 85% of telecom equipment in the country is imported and 20% BCD is charged on them. Higher customs duty on telecom equipment is disrupting cost-effectiveness for telecommunication companies. Until good quality and affordable equipment become available in India, customs duties for 4G/5G related network products should be exempted, said COAI.