Govt to roll out single levy in telecom soon

The government is close to rolling out a single tax regime for the telecom industry that would help in lowering overall tariffs for telephone services in the country. The Department of Telecommunications (DoT), which has been mandated to simplify the multifarious levies, would introduce the new regime in phases.

The telecom ministry has set up a sub-committee to review the present tax and levies in the industry, and based on the panel's recommendations the DoT will formulate a single tax structure. The first phase of the policy is expected to be in place during this year itself.

Following this, DoT will work on the second leg and then on the final phase, which would take another 12-24 months from the date of implementation of the first phase, sources close to the development told Business Standard.

According to the board contours of the new regime, DoT will club various levies like licence fee and spectrum charges among others into a single central levy under the first phase. In the second phase, the composite telecom tax and state levies among others would be rationalised and re-grouped.

Eventually in the third phase all multiple levies would be removed and replaced with a single or a unified levy that would be implemented with ease. The unified levy would replace various levies like the central and state government taxes.

The single levy system was proposed by Finance Minister P Chidambaram in his Budget presentation. He had asked DoT to set up a committee to study the present structure of levies and make suitable recommendations to the government.

At present, the telecom operators pay up to 30 per cent of their annual revenues in the form of various levies, which include 10 per cent licence fee, 12 per cent service tax, 4 per cent spectrum charges and other state specific levies like octroi and sales tax.

Earlier, the Cellular Operators Association of India (COAI) said if the total levy is brought down by 5-6 per cent, it could result in lowering of existing tariffs. However, the industry had expressed concerns that no time frame had been set for the committee to make its recommendations.