Union Budget 2024-25: COAI Urges Vital Tax Reforms to Boost Indian Telecom Sector

COAI recommends crucial tax reforms in the Union Budget 2024-25, including abolishing the USOF levy, reducing License Fees, and extending business loss carry forward.

Punam Singh
New Update

COAI Reccommends Vital Tax Reforms to GST Council

The Cellular Operators Association of India (COAI), the apex body representing India's digital communications ecosystem, has released its recommendations for the Union Budget 2024-25. The organization has urged the Ministry of Finance to implement crucial tax reforms.


COAI has recommended several reforms like the abolition of regulatory levies – USOF and AGR, exemption of service tax on additional AGR Dues, reduction of customs duty, and others. These reforms are aimed solely at enhancing the telecom sector's financial health, which is vital for achieving the Government’s mission of digital empowerment and inclusivity for its citizens.

What Changes Need to be Made

Abolition of  Regulatory Levies – USOF and AGR


COAI recommends abolishing the Universal Service Obligation Fund (USOF) levy, highlighting the immense capital investments required by Telecom Service Providers (TSPs) for 5G deployment. They suggest suspending the USO contribution of 5% of Adjusted Gross Revenue (AGR) until the existing USO corpus of approximately INR 80,000 crore is exhausted. Additionally, COAI calls for the urgent reduction of the License Fee from 3% to 1%, alleviating the financial burden on TSPs.

The current definition of Gross Revenue (GR) is also a concern. It includes revenue from all telecom activities, creating ambiguity. COAI advocates for a precise definition, excluding revenue from activities not requiring a license.

Service Tax Exemption on Additional AGR Dues


COAI emphasizes the need for exemption from Service Tax on the "assignment of right to use natural resources" granted by the Government. The Supreme Court’s ruling has increased the financial burden on TSPs, with additional AGR dues now attracting Service Tax without credit. COAI urges exemption from Service Tax for the period from April 2016 to June 2017, or alternatively.

Reducing Customs Duty

The gradual increase in customs duty on telecom equipment to 20% has significantly impacted the rollout of 5G services. COAI requests exemptions on customs duties for certain telecom equipment to alleviate these costs. They recommend reducing customs duties for 4G and 5G network products to NIL until high-quality domestic equipment is available at competitive prices.


GST Exemption

Telecom operators currently pay GST under RCM on payments to the DoT for License Fees, Spectrum Usage Charges, and Spectrum acquired in auctions, leading to substantial ITC accumulation and blocked working capital. COAI urges exemption from GST under RCM on these payments and proposes allowing the payment of RCM on Government Services through ITC balance utilization in the Electronic Credit Ledger.

Customs Duty Exemption for Cable Repair/Installation Operations in EEZ


With the current customs duty exemption for vessels laying submarine cables set to expire on September 30, 2024, COAI calls for an urgent extension to prevent increased costs and potential service quality compromises.

Lt. Gen. Dr. S.P. Kochhar’s Perspective

“Over the past decade, the Government of India has undertaken several reformative steps to fuel India’s digital ambitions and achieve accelerated growth. The telecom industry plays a pivotal role in this transition providing affordable connectivity and inclusivity. Thus, reducing the TSPs’ levy burden and facilitating investment opportunities are not just an economic necessity but a strategic investment for the country’s future. We hope the government will consider these recommendations in the upcoming budget and help the industry navigate through these prolonged challenges. With 5G expected to catalyze digital transformation across sectors, we also urge the government to prioritize telecom infrastructure development. By doing so, the new government can set a precedent for visionary policymaking, driving India towards a robust digital future”, said Lt. Gen. Dr. S.P. Kochhar, Director General, COAI.


Looking Ahead

It seems that the industry is optimistic that the GST Council will consider COAI’s recommendations, which are crucial for improving the ease of doing business and restoring the financial health of this prime sector.

With 5G expected to catalyze digital transformation across sectors, prioritizing telecom infrastructure development is paramount and the new government has the opportunity to set a precedent for visionary policymaking.