Budget: COAI Urges Elimination of USOF Levy, Customs Duty and GST Exemptions

In its fiscal year 2025 budget proposals to the Ministry of Finance, the Cellular Operators Association of India (COAI) has proposed the elimination of the Universal Service Obligation Fund (USOF) levy. Additionally, COAI suggests the implementation of a special tax regime for telecom carriers, customs duty exemptions on the import of network equipment, and relief from Goods and Services Tax (GST), among other recommendations. The industry association, headquartered in Delhi, emphasizes that its suggestions aim to improve the financial health of the sector. COAI's membership includes leading telecom operators in India such as Reliance Jio, Bharti Airtel, and Vodafone Idea.

The Union Budget session is set to take place on January 31, with Finance Minister Nirmala Sitharaman slated to present the Interim Budget for the fiscal year 2025 on February 1. According to a statement from COAI, the association believes that it would be ideal to abolish the Universal Service Obligation Fund (USOF) levy. “However, if that is not possible, then the USO contribution of 5% of AGR may be suspended till the existing USO corpus (INR 77,000 crores) is exhausted", it said. Further, it recommended that the license fee should be brought down from 3% to 1% at the earliest to cover only administrative costs by the Department of Telecommunications (DoT)/government.

COAI has emphasized that the definition of gross revenue should explicitly exclude income from activities not requiring a license. The association has urged the introduction of a unique framework for telecom operators under Section 72 of the Income Tax Act, of 1961. This proposal seeks to extend the period for carrying forward and setting off business losses from the current eight (8) years to sixteen (16) assessment years.

Further, COAI has requested that the levy of service tax on the “assignment of right to use natural resources” granted by the central government/state government and development authorities be exempted. COAI said that the government of India, over the past five to six years, has increased the customs duty on telecom equipment to 20% which has put an additional financial burden on telecom companies and has impacted the rollout of 5G services in the country.

The industry body has requested that the customs duty should be reduced to zero and have to be gradually increased depending on the creation of an ecosystem for manufacturing telecom gear in India. “Till the time good quality equipment is available in India at affordable prices, customs duties for 4G/5G related network products, along with other related products, should be brought down to nil", COAI said.

COAI has appealed to the government for the exemption of Goods and Services Tax (GST) on license fees, spectrum usage charges, and spectrum acquisition fees, aiming to provide essential relief to the sector. As an alternative, the association has suggested permitting the payment of government services under the reverse charge mechanism (RCM) through the available Input Tax Credit (ITC) balance in the electronic credit ledger.

“By allocating adequate resources for 5G rollout, network expansion and fiberization in the upcoming budget, the government can unlock this critical sector's full potential and propel us towards a digitally empowered nation", said S.P. Kochhar, Director General of COAI. The association has strongly urged the government to prioritize telecom infrastructure development in the upcoming budget by addressing the regulatory burdens. “Doing so will unlock the full potential of this critical sector, propelling India towards a robust and inclusive digital future", Kochhar said.