Synopsis
The Cellular Operators Association of India (COAI) has submitted recommendations for the Union Budget 2025-26, proposing significant reforms to invigorate the telecom industry, including the abolition of the USOF levy and a reduction in license fees. These measures aim to alleviate financial burdens on Telecom Service Providers (TSPs) and support the rollout of 5G services.Key Takeaways
- Elimination of USOF Levy
- Reduction of License Fee from 3% to 1%
- Revised Definition of Gross Revenue
- Contributions from Large Traffic Generators
- Clarification on Service Tax Obligations
New Delhi, Jan 20 (NationPress) In an effort to energize the telecom sector, the Cellular Operators Association of India (COAI) on Monday presented a set of recommendations for the forthcoming Union Budget 2025-26 to the Ministry of Finance.
Given the significant capital requirements for Telecom Service Providers (TSPs) amid the current landscape, particularly for 5G deployment, COAI proposed the elimination of the Universal Service Obligation Fund (USOF) levy.
“Alternatively, the government could consider suspending the USO contribution of 5 percent of Adjusted Gross Revenue (AGR) until the current USO corpus, exceeding Rs 86,000 crore, is depleted,” stated the leading telecom industry association.
Additionally, COAI urged an urgent reduction of the license fee from 3 percent to 1 percent, ensuring it merely covers the administrative expenses incurred by the Department of Telecommunications (DoT) and the government, thereby alleviating the financial strain on TSPs.
The industry has expressed concerns regarding the current definition of Gross Revenue (GR), which encompasses revenue from all telecom-related activities.
COAI suggested a more precise definition of GR, indicating that revenue from activities not requiring a license should be excluded from GR.
“Furthermore, we firmly believe that large traffic generators (LTG) should bear responsibility for contributing to the development of telecom infrastructure, as they benefit from the networks established by telecom companies without contributing to the infrastructure costs,” COAI emphasized.
It was recommended that LTGs contribute to the USO fund/Digital Bharat Nidhi Fund, thereby supporting the Indian digital economy.
Due to fierce price competition, the telecom landscape in India has consolidated from over 10 companies in 2017 to just 3 private and 1 public sector entity, which is viewed as an optimal structure that fosters healthy competition.
“Moreover, the cash flow and forecasts for some telecom players have been negatively affected following the Supreme Court ruling of 2019 regarding the calculation of AGR, compelling telecom operators to settle additional AGR dues based on revised calculations over an extended timeframe,” COAI noted.
COAI also sought clarification from the government that service tax should not be applicable on increased License Fees (LF) and Spectrum Usage Charges (SUC) arising from the Supreme Court’s AGR decision.
In recent years, the government has progressively increased customs duty on telecom equipment to 20 percent, imposing a substantial financial burden on telecom firms and notably hindering the rollout of 5G services in India.
COAI has requested an exemption from the Basic Customs Duty (BCD) on telecom equipment under CTH 8517, which was raised on October 11, 2018, to mitigate the cost challenges related to deploying this vital infrastructure.
