Telecom industry on Tuesday made a strong case for doing away with various levies in the telecom sector and replacing them with just service tax in the Budget to lower the tax burden and encourage more investment in the fast growing sector.
At a pre-Budget meeting that Finance Minister P Chidambaram had with the industry, the telecom industry represented by Bharti group chairman Sunil Mittal and Reliance Infocomm chief Mukesh Ambani is understood to have pleaded for replacing various levies in the telecom sector including licence fee, Access Deficit Charge, spectrum charges with a single tax of service tax.
The various levies in the telecom sector add up to a tax incidence of 35 per cent, industry sources said, adding these levies should be replaced by service tax whose rate could be raised from the present 10 to 15 per cent.
Chidambaram has already said he favoured moving towards a single rate goods and services tax to replace the excise duty and service tax. It will be a sort of a national value added tax.
The telecom industry at present pays 15 per cent licence fee, five per cent wireless charges and nearly 10 per cent Access Deficit Charge and over that 10 per cent service tax.
Recently, Mittal had said that there was scope for 30 per cent reduction in mobile tariffs if taxes are removed.
"Today telecom services are being charged at 40 per cent, which is very high for an essential service like communication. There is a scope for 30 per cent reduction in mobile tariffs if the government brings down the current taxes on telecom industry, Mittal had said.
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