Tax cuts likely to boost broadband subscription

RUN UP TO BUDGET 2006

Finance Ministry may allow 100% depreciation for PCs in the first year.

With broadband Internet usage in the country growing slower than expected, the government may reduce duties on equipment used for this. Currently, broadband access equipment is charged an average import duty of 16 per cent.

The finance ministry may also consider a proposal to reduce entertainment tax on broadband subscription and a waiver of sales tax on goods and services that are transacted electronically.

DoT sources said this issue related to states as each state employed a different sales tax rate for e-commerce transactions. Broadband service providers are also charged an average 30 per cent entertainment tax by states for services provided through this platform.

"Concessions for broadband equipment will also benefit telecom players as it will result in reduced duty for microwave equipment. Unlike most telecom equipment, which have zero duties, microwave continues to be under the 16 per cent slab," said an industry analyst.

Sources also added the finance ministry was considering the industry's demand that 100 per cent depreciation be allowed in the first year for personal computers and consumer premises equipment, including modems and routers.

The request for special emphasis on broadband in the Budget stems from the slow growth in usage "" India had a mere 8,40,000 high-speed Internet customers by December 2005. The target for the same period was 3 million connections.

At this rate, the usage will have to grow at five times the current rate to catch up with the broadband policy target of 10 million users by 2007.

Concerned over the country's failure to meet its broadband target, the Telecom Regulatory Authority of India has recently taken up the operators' case and recommended that the Centre ask all state governments to waive sales tax on goods and services for e-commerce transactions for the next five years.

Trai had also called on state governments to waive the 30 per cent entertainment tax for services provided through the broadband platform.