Lower taxes yield more: Trai

Indian telcos pay 17-26% as taxes as against 5% paid by Asian peers.

Indian telecom operators pay between 17 per cent and 26 per cent of their revenues as levies and taxes to the government, as against 5 per cent paid by operators in other countries in the sub-continent and China, a Telecom Regulatory Authority of India (Trai) report has said.

"India has very heavy taxation vis-a-vis its neighbouring countries, and reducing levies is essential to lower the cost to the customer, to universalise telecom services in real terms and to increase the penetration in new markets, particularly in rural areas," the report says.

The regulator made a case for imposing licence fees and spectrum charges only for the universal service obligation and to cover administrative costs. Despite the high levies, telecom tariffs in India are among the lowest in the world. For instance, a 60 second call costs 3 cents in India, compared with 4 cents in China, 11 cents in Brazil, 24 cents in Australia and 33 cents in Japan.

Under the present regime, Trai estimates, the government will collect Rs 17,850 crore in 2005-06 as levies from licence fees, spectrum fees, service tax and the universal service obligation. This is projected to increase to Rs 25,000 crore next year and Rs 30,856 crore during 2007-08. Trai has said reduced levies will spur growth and help the government generate more resources.

It pointed out that under the 2001 regime, with a licence fee of 8-12 per cent for mobile services, the government received Rs 657 crore in 2002-03.

Under the present regime, with a licence fee of 6- 8 per cent of the adjusted gross revenue, the growth in the sector has resulted in the government receiving Rs 1,666 crore in 2004-05. The government can hope to generate Rs 2,831 crore in 2005-06 from mobile operators as licence fee, Trai said.

Similarly, the levy collected as license fee for all telecom services has increased from Rs 4,080 crore in 2002-03, to Rs 8,500 crore in 2005-06 and is estimated at over Rs 13,000 crore in 2007-08.

The exponential growth in the telecom sector has seen the service tax increase from Rs 2,040 crore in 2002-03 to Rs 8,500 crore in 2005-06, and the figure is expected to touch Rs 14,365 crore in 2007-08.

"There is no better example of growth in revenue from lower taxation," the report added.