NEW DELHI: Telecom companies will have to pay service tax along with installments as part of the deferred payment option under the existing spectrum auction system, the Revenue Department said today.
However, it clarified that service tax payable, whether in full upfront or in installments, for assignment of right to use spectrum has been exempted from service tax.
“By these measures, the government has ensured that there is no new tax liability on the telecom service providers (TSPs) in respect of the services provided in the past,” the statement said.
Under the existing auction system of assigning spectrum, government has provided the option to TSPs either making full upfront payment, or 25 per cent/33 per cent part upfront payment initially and thereafter making payment in equal number of installments, under the deferred payment option.
Responding to the concern raised by the TSPs on the liability of service tax under the deferred payment option, the revenue department said: “Service tax would be payable when the payments, whether full upfront or part under the deferred payment option, become due or are made, whichever is earlier.
“As a result, if a TSP opts for the deferred payment option, then the liability to pay service tax arises on the date on which the part payment or installments become due as specified in any invoice, bill, challan or any other document”.
There were apprehensions among TSPs that liability to pay the entire service tax payable on the full auction price at the time of assignment would severely jeopardise their finances.
On the specific issue raised by TSPs with regard to service tax on installments due after April 1, 2016, for spectrum allocated to them in the past, the revenue department said: “whether in full upfront or in installments, for assignment of right to use such spectrum has been exempted from service tax”.