New Delhi/Mumbai: The Department of Telecommunications will ask the finance ministry to refer the pending issue of refunding input tax credits of telecom companies worth Rs 36,000 crore to the GST Council, a move that could provide further relief to Vodafone Idea and Bharti AirtelNSE -1.33 %.
One official said wider consultations are needed on the matter of reducing licence fees for telcos and this includes the impact of their planned tariff increases.
“The department will take up this matter of input tax credit offset with the finance ministry now. It has to eventually go to the GST Council,” a senior telecom department official told ET.
The Committee of Secretaries headed by Cabinet Secretary Rajiv Gauba, which is evaluating steps to restore the health of the sector, had suggested that Goods & Services Tax issues should be resolved by the GST Council, ET reported in its November 13 edition.
The telecom industry has been urging the government to refund the input tax credits or adjust them against spectrum dues. Input tax credit worth some Rs 18,000 crore for Reliance Jio, about Rs 10,000 crore for Bharti Airtel and roughly Rs 8,000 crore for Vodafone Idea are currently stuck with the finance ministry.
If cleared, the refund would provide more cashflow relief to loss-making Vodafone Idea and Bharti Airtel, which face additional statutory dues of Rs 89,000 crore to be paid in less than three months after the Supreme Court ruling that widened the definition of adjusted gross revenue (AGR).
The government on Wednesday approved a moratorium on spectrum payments for 2020-21 and 2021-2022, enabling Vodafone Idea and Airtel to get a cashflow boost of about Rs 35,000 crore.
The Cabinet, though, did not act on the demand to reduce licence fees, which is paid as a percentage of AGR, with officials saying the matter needs more consultation. The government wants the telcos to approach the SC for relief on AGR payments by obtaining a waiver on interest and penalties, which make up about 75% of their dues, and an extension of the three-month timeline. Telcos are expected to file review petitions shortly.
“Moratorium doesn’t forgo government revenue but reducing licence fee will have implications as the annual government revenue will prospectively reduce, so one section in the government feels we must study the impact of the tariff hikes in the telecom sector,” said another official, asking not to be identified. Vodafone Idea and Airtel said they will increase rates from December and Jio may follow.
The official said if the rate increase is absorbed well by the consumers, there could be additional rounds of marginal hikes in the future. That “is when the DoT should take a call on the quantum of licence fee to be cut because this cut will be a permanent one,” the official said.
Telcos pay some 8% of AGR annually as licence fees and 3-4% of AGR as spectrum usage charges. There were expectations the licence fees would be cut to 5% and SUC would be reduced.
The Confederation of Indian Industry recently wrote to finance minister Nirmala Sitharaman and telecom minister Ravi Shankar Prasad, saying if the AGR dues are recovered in full, it would impact the viability of telcos and other companies in the industry.
It urged the government to continue with its policy of encouraging healthy competition, with at least 3-4 key strong players, and work towards addressing issues facing the sector with that perspective.
In the letter, also marked to the Prime Minister’s Office and Gauba, the industry said both airlines and the telecom sector have faced consolidation, price wars and are capital-intensive with high tax levels.
“Their massive debt burden (estimated to be Rs 7 lakh crore) threatens not only their individual existence but also the much-needed vibrancy in this important sector,” the CII note added.[“source=economictimes”]