DoT Plans to Seek 10-year Tax Relief for Telecom Infrastructure Sector

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The  Department of Telecom (DoT) is planning to ask the finance ministry to offer a tax relief for 10 years without a sunset clause and make viability gap funding available for the telecom infrastructure sector.

Telecom sector companies including the service providers and struggling tower companies had sought for more fiscal benefits from the government over the last couple of months. The sector was formally given an infrastructure status in April this year but some demands of the industry around funding and investment remained unmet.

In the draft note prepared for the finance ministry, the telecom department (DoT) said that telecom plays a critical role to facilitate growth of the economy.

The telecom tower sector has been in a quagmire since last several quarters, with fewer towers being added in the wake of the 2G airwave scandal that resulted in cancellation of 122 telecom licenses, and hence the exit of players based on whom tower companies had made their business case. Muted capital expenditure and expansion from telecom operators added to the companies’ woes.

DoT has recommended that a 100 percent tax holiday for 10 years in a block of 20 years be given to the telecom industry, including towers, to bring it at par with other infrastructure sectors like ports, roads and power, according to the note.

It has sought benefits for the industry like viability gap funding and lower insurance premium on infrastructure assets, which other infrastructure sectors avail. It has also recommended that capital goods used to erect towers – angles, beams and pre-fabricated shelters – be included in the Central Value Added Tax credit rules to reduce the overall cost of offering services.

DoT has however left it to the department of revenue’s judgment to approve the industry’s demand of availing higher depreciation. It has also not sided with the industry on demands of reducing or exempting import duty on equipment and allowing external commercial borrowing to be used for working capital.

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