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Pre-budget Outlook: Telecom Sector

The forthcoming budget may be crucial for the telecom industry because the enormous 5G deployment is gaining momentum.

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Ayushi Singh
New Update
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The forthcoming budget may be crucial for the telecom industry because the enormous 5G deployment is gaining momentum. As carriers build up the nationwide infrastructure for their respective 5G services, 2023 is anticipated to be prime financial backing year for the industry.

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Bharti Airtel and Reliance Jio have started rolling out their 5G services gradually toward the end of last year, Vodafone Idea on the other hand is yet to reveal its 5G strategy.

In addition, as this would be the present government's final budget before the next general election, scheduled in 2024, it is anticipated to be the budget focused on growth. While employment growth and investment supported expansion are likely to be the budget's main priorities, the telecom sector is requesting government assistance for the enlargement of infrastructure, including 5G deployment and widespread and improved internet connectivity in rural and most extreme locations.

Telecom sector is also battling for laws that support fair competition and safeguard the interests of consumes, as well as tax incentives to uplift investment in the sector.

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Before the budget, the government received some critical proposals from the Cellular Operators Association of India (COAI), the leading telecom hallway with its core members being Reliance Jio, Bharti Airtel and Vodafone Idea. Its affiliate members include the Indian Subsidiaries of Qualcomm, Apple, Google, and Facebook.

Some of the main concerns and worries expressed include:

  • High tax burden and overburden of regulations.
  • Dependency on imports for apparatus
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Some critical proposals by COAI include:

  • Licence fee is decreased from 3% of AGR to 1% of AGR.
  • Until the current USO corpus is depleted, 5% of AGR is exempted from USOF contribution.
  • Defining "telecom activities" with clarity in terms of determining gross revenue.
  • Imports of telecom equipment are exempted from the application of the Basic Customs Duty.
  • An explanation of the input tax credit (ITC) for essential telecom equipment installed on telecom towers.
  • Return of GST's accumulated Input Tax Credit, which is over INR 32,000 crore.

Mr. Gaurav Gandhi, Founder and CEO of Echelon Edge Pvt Ltd, says “The telecom sector will continue to play a pivotal role in India's growth story as a key enabler of growth and development. The nationwide rollout of 5G will be central to this growth in the next year. Going further, we expect the government to minimize the import of several telecom-related components. The Government should focus on investing in R&D and manufacturing to boost the telecom sector. In this regard, incentive schemes to push the 'Make in India' drive for domestic manufacturing can help. Apart from that, incentive plans should be introduced for innovation along with a reduction in license fees. We also expect duty exemptions on key telecom equipment. The telecom sector also seeks input tax credits against GST paid on telecom towers. We also seek a reduction in GST rates to reduce the financial burden on TSP/passive infrastructure providers. The sector also seeks stimulus packages from the budget for the penetration and proliferation of rural areas to achieve the dream of a Digital India. In addition to this, smooth and lucrative reforms for 5G rollouts are expected, so that technology firms do not face problems in acquiring private networks. Incentives for promoting new technologies to increase efficiency for the sector are expected as well.”

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Mr. Tony Verghese, Partner, JSA a corporate law firm said, “On Budget 2023, there are indeed enthusiastic expectations from the telecom industry. With the 5G impetus, it is important for the Government to provide more benefits from the context of taxes and duties towards allowing more software and hardware imports into India. While the enormous Make in India initiative of the Government has been a success, however, it is important that towards effective and faster implementation of the 5G network and technology, more benefits are offered given that imports are nevertheless still high in the Telecom sector.

Further, the industry bodies have already represented to the Government, the requirement of reduction in license fees, including other tax-related concerns such as GST on spectrum charges and suspension of USO obligations. There is a high expectation from the Government to consider these requests, given the immense pressure to drive the Digital India campaign by the Government.

However, with significant Assembly elections including the Union election around the corner, it is intriguing to see whether the Budget focus will indeed be better benefits to industries, particularly the telecom sector.”

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