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By Vishal Malhotra, <\/strong> Tax Leader, Technology, Media & Entertainment and Telecommunications (TMT), <\/strong> EY<\/a> India<\/strong>\n
The Indian telecom sector has witnessed a fall in profitability in recent times primarily due to raging price wars between the industry<\/a> players which has otherwise benefitted the consumer base at large. Catering to more than 1.2 billion subscribers, the industry has witnessed consolidation and multiple acquisitions in recent times. The industry believes that by the end of 2018, the collective synergies should reap positive results.
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\nOperating in a highly competitive and regulated environment, the Indian telcos have time and again sought support from the government for streamlining of tax and regulatory laws which have added to their financial woes. Although, representations have been made to the Finance Ministry to cut down tax compliances and bring certainty in litigious issues, however the efforts have been largely futile as the bucket list of the industry players broadly remains unchanged.
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\nWithholding tax on discounts offered to distributors<\/strong>
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\nOne of issues which has haunted telecom sector for long is the obligation to withhold tax on discounts offered to distributors of pre-paid services. The income tax authorities have taken a view that such discounts are in the nature of ‘commission’ since the relationship between the telcos and the distributors is in the nature of principal to agent (P2A), and therefore, withholding of tax at source under section 194H of the Act is mandated. On the other hand, the telcos are of the opinion that withholding provisions are not attracted since the distributors' margins are not in the nature of 'commission' and the relationship with the distributors is that of a principal to principal (P2P).
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Although, lately the High Courts across the country, have primarily ruled in favour of the income tax authorities, the final verdict from the Supreme Court<\/a> is still pending. The difference in the positions adopted has resulted in piling up of litigation year on year and an increased tax bills. Till this issue attains finality, the industry will keep grappling with high tax demands raised on a repetitive basis and ever increasing interest cost. Though nothing much is expected on the principle issue involved, it would be a welcome change if the Budget addresses the cash flow trouble of the telcos by reducing the withholding tax rate on commission from the current 5% to say 1%. This will not only reduce the burden of demands to a significant extent but will also ensure effective cash management for the distributors of prepaid services who operate on very low margins.
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\nDeductibility of expenditure on acquiring ‘Right to use spectrum’ prior to April 1, 2016<\/strong>
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\nWith the introduction of Section 35ABA, there is now clarity on amortization of expenditure incurred for acquisition of ‘right to use spectrum’ over the tenure of the right. However, for the period prior to April 01, 2016 there are ambiguities as to whether the consideration shall be amortizable under the said provision or eligible for tax depreciation under section 32.
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\nThe telcos expect a clarification from the Government and provide certainty that the expenditure incurred towards ‘right to use spectrum’ acquired prior to April 1, 2016 would be entitled to depreciation under the normal provisions of the IT Act.
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\nClarity on characterisation of standard telecom services as ‘Royalty’<\/strong>
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\nThe Budget of 2012 unveiled many retroactive amendments, including the infamous amendment to Section 9 which brought within the tax net transfer of shares or interest in a foreign company having underlying assets in India. In the same budget, retroactive amendment was brought in the definition of ‘royalty’ which has intentionally or unintentionally brought within the tax net certain standard telecom services (such as mobile \/ fixed telephonic, internet charges, roaming charges, interconnect charges etc.). The interpretation of these amendments have been tested before the Courts and the decisions have largely favoured the tax payers. Even internationally, payments for such standard services are not characterised as ‘royalty’, however, the income tax authorities have taken a different view leading to litigations at multiple levels and significant tax demands. Thus, clarification is required with respect to the said amendments to exclude the payments for such standard telecom services from the ambit of ‘royalties’.
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\nRationalisation of duties and exemptions<\/strong>
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\nThe Government, in the past, has withdrawn customs duty exemptions on telecom equipment to promote domestic manufacturing. Disparity on duty structure between imported & indigenous has been supported by the local manufacturers, especially the mobile handset industry which has seen lot of manufacturing being set-up in the past three years. It is expected that the Government, keeping in mind the ‘Make in India’ agenda and demand of domestic manufacturers, would further increase duty on the mobile handsets. The Government may also withdraw duty exemptions on major component (PCBs, Camera module, Connectors) under the phased manufacturing plan (PMP) introduced for mobile handset industry. With such high duty differential, the Government would need to have strict enforcement measures so that the grey market do not thrive.
\nDomestic equipment manufacturers are also proposing further increase in duty rates on telecom infrastructure products to promote ‘Make in India’. However, the Government should also weigh the cons of increasing duty rates on telecom infrastructure equipment on the cost of providing services. The industry is expecting that the Government shall proceed slowly on rate increase until the comprehensive manufacturing ecosystem is available for achieving the desired intent.
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\nALSO READ: Telecom sector leads M&A activity in India with six deals<\/a><\/strong>
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\nNeed for reforms in few pain areas<\/strong>
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\n• The wide powers given to the field officer to order ‘special audit’ has been used as a tool to refer cases of some of the major telcos on the ground that their accounts \/ transactions are voluminous. The said provisions require a revisit to ensure that special audits are not referred as a norm and a clarification is required to provide that such action must be initiated in very rare circumstances.
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\n• Necessary directions to the field officer for issuing nil \/ lower withholding certificates in a time bound manner which will be effective from the first day of the financial year will ease the hindrances caused due to delay in issuance of the certificates. Further, issuance of a blanket certificate for all customers instead of customer wise certificates will be also be a welcome change.
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As the Indian Telecom Industry is undergoing a massive transition, all eyes are on the upcoming Union Budget 2018, which is set to be unveiled by the Finance Minister, Mr. Arun Jaitley<\/a>, on February 01, 2018. The telcos are hoping that the important issues will be addressed and streamlined such that the industry is able to focus on their core business activities.
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\nALSO READ: Telecom industry not ready for next round of spectrum auctions for at least a year: COAI<\/a><\/strong><\/body>","next_sibling":[{"msid":62706387,"title":"Former Vodafone executive Manoj Misra joins GSMA as Senior Public Policy Director","entity_type":"ARTICLE","link":"\/news\/former-vodafone-executive-manoj-misra-joins-gsma-as-senior-public-policy-director\/62706387","category_name":null,"category_name_seo":"telecomnews"}],"related_content":[],"msid":62707215,"entity_type":"ARTICLE","title":"Major reforms in pain areas needed to bring stability in telecom sector: EY","synopsis":"The Indian telecom sector has witnessed a fall in profitability in recent times primarily due to raging price wars between the industry players","titleseo":"telecomnews\/major-reforms-in-pain-areas-needed-to-bring-stability-in-telecom-sector-ey","status":"ACTIVE","authors":[],"Alttitle":{"minfo":""},"artag":"ETTelecom","artdate":"2018-01-30 12:57:06","lastupd":"2018-01-30 15:23:23","breadcrumbTags":["Budget2018","Supreme Court","EY","Arun Jaitley","Telecom operators","industry"],"secinfo":{"seolocation":"telecomnews\/major-reforms-in-pain-areas-needed-to-bring-stability-in-telecom-sector-ey"}}" data-authors="[" "]" data-category-name="" data-category_id="" data-date="2018-01-30" data-index="article_1">
由Vishal Malhotra
税收领袖、技术、媒体和娱乐和通信(TMT),
莎莉印度
印度电信业近年来目睹了盈利能力的下降主要是由于之间激烈的价格战行业球员,否则受益消费者基地。迎合了超过12亿用户,行业已经目睹了整合和多个最近收购。业界认为,到2018年底,集体协同效应应该获得积极的结果。
操作在一个高度竞争和监管环境,印度电信公司一次又一次地寻求政府的支持精简税收和监管法律已添加到他们的财务困境。虽然,表征了财政部削减税收遵从性和带来确定性诉讼问题,但是很大程度上是徒劳的努力的遗愿清单业内大致保持不变。
预扣税的折扣提供给分销商
的问题之一闹鬼的电信行业长期的折扣税规定的扣缴义务预付费服务的分销商。所得税当局采取了一个视图,这样折扣“委员会”的本质,因为电信公司和经销商之间的关系的本质主要代理(P2A),因此,从源扣缴税款194 h的法案规定下部分。另一方面,电信公司都认为扣缴规定不以来吸引经销商的利润并不是性质的委员会”,与经销商的关系是主体,主体(P2P)。
虽然最近全国高等法院,主要裁定赞成收入税务机关,最终的判决最高法院仍悬而未决。的不同位置采用导致堆积的诉讼,增加税收。这个问题直到达到结尾,该行业将继续应对高要求一个重复的基础上提高税收和利息成本不断增加。虽然没什么预计在原则问题上,这将是一个受欢迎的变化如果预算地址电信公司的现金流问题委员会通过减少预提税率从当前的5%至1%。这不仅会降低要求的负担很大程度上还将确保有效现金管理分销商的预付服务操作非常低的利润。
可抵扣程度的支出获取频谱使用权的4月1日之前,2016年
35 aba的介绍部分,现在明确的费用摊销收购“频谱使用权”的任期。然而,2016年4月1日之前的有歧义是否考虑应当amortizable说下条款或资格获得税收折旧部分32。
电信公司期望从政府澄清并提供确定性的费用向“频谱使用权”收购了4月1日之前,2016年将是有权折旧正常规定下的行为。
清晰的描述标准电信服务“皇室”
公布的2012年的预算许多追溯修正案,包括臭名昭著的修正案第9节带来的税收净转移股票或兴趣一家外国公司在印度拥有标的资产。在同一预算,追溯修正案是在“皇室”的定义中有意或无意中使税收净某些标准电信服务(如手机/固定电话、互联网费用,漫游费,互连费用等)。这些修正案的解释法院和之前已测试的决定在很大程度上有利于纳税人。甚至在国际上,支付这样的标准服务并不像“皇室”的特征,然而,所得税当局采取了不同的观点在不同层次导致诉讼和重大税收的要求。因此,澄清关于说需要修改支付这样的标准电信服务排除在“特许权使用费”的范围。
合理化的职责和豁免
在过去,政府已经撤销关税豁免电信设备,促进国内制造业。进口和土著之间的差距值班结构已经支持的本地制造商,尤其是手机行业,很多制造业被设置在过去的三年里。预计政府,记住在印度的议程和需求的国内制造商,将进一步提高关税手机。政府也可以撤回责任豁免主要组件(多氯联苯,相机模块、连接器)根据分阶段生产计划(PMP)推出了手机行业。如此高的微分,政府需要有严格的强制措施,灰色市场不茁壮成长。
国内设备制造商也提出了进一步提高税率对电信基础设施产品,促进“让印度”。然而,政府也应该权衡缺点增加税率的电信基础设施设备提供服务的成本。业内人士预计,政府应当进行缓慢加息,直到全面生产生态系统可实现预期的目的。
还读:电信业导致并购活动在印度有六个交易
在一些疼痛领域需要改革
•广泛的权力给陆军校级军官的命令“特种审计”已被用作工具参考例的一些主要电信公司在地上,他们的帐户/事务的。说规定需要重新审视,确保才称为特殊审计规范和澄清是需要提供这样的行动必须在非常罕见的情况下发起的。
•必要方向的校级军官发行零/低扣证书时间绑定的方式将有效的财政年度的第一天将缓解因延误造成的障碍签发证书。进一步发行覆盖所有客户证书,而不是客户明智的证书也将是一个可喜的改变。
随着印度电信行业正在经历一个巨大的转变,所有人都在关注即将到来的2018年预算,将公布的财政部长。杰2018年2月1日。电信公司希望重要的问题将得到解决和流线型的行业能够专注于他们的核心业务活动。
还读:电信行业没有准备好下一轮频谱拍卖至少一年:COAI
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