The Centre is working on a two-pronged strategy to aid the crisis-ridden telecom industry by rationalizing tax and levies for long-term sustenance of the strategic sector that will follow an immediate bailout package to avert the present crisis involving the payment of 1.47 lakh crore adjusted gross revenue (AGR) dues before March 17, officials aware of the developments said on Sunday.
In order to boost the sector in the long run, the government is considering proposals such as reduction in the Goods and Services Tax (GST) on telecom equipment and services from 18% to 12%, slashing the levy on the Universal Service Obligation (USO) from 5% to 3% and expeditiously refunding input tax credits worth about 36,000 crore, two officials from separate ministries said on condition of anonymity.
Instant refund of an input tax credit is unlikely as this would require the approval of the GST Council, but immediate bailout may include other measures such as a soft loan, possibly from the accumulated USO Fund, which is more than 50,000 crore, one of the officials said.
Hindustan Times on Friday reported that the government was considering an immediate bailout package to salvage stressed telcos, particularly two private telecom operators, Airtel and Vodafone Idea, including a review of the calculation of the amount owed by them and allowing them to pay part of the AGR revenue in installments.
The USO Fund is used to create telecom infrastructure and offer telecom services in inaccessible and non-profitable areas. The USO Fund was established from April 1, 2002. The USO levy is decided by the government in consultation with the Telecom Regulatory Authority of India (TRAI) as a percentage of a telco’s revenue share. At present, telcos pay a license fee of 8% of the adjusted gross revenue, inclusive of the USO levy, which is 5% of the AGR.
Private companies have shown their intent to pay AGR dues after the Supreme Court on February 14 directed the Department of Telecommunications and companies to comply with its October order to pay the AGR dues. Until last week, Airtel paid 10,000 crores and Vodafone Idea paid a total of 3,500 crores in two installments. According to the SC verdict, the telcos were expected to pay AGR dues of about 1.47 lakh crore by January 23, 2020. Airtel owes around 35,000 crores and Vodafone Idea about 55,000 crores. The government is keen to offer a bailout package before the next hearing of the Supreme Court, which is on March 17, the officials said.
The government is considering various options because it wants to prevent any telco from going out of business, something that would, given the size and importance of these firms, adversely affect the investor’s sentiment, restrict consumers’ choice and increase stress in the banking sector. As per an Inter-Ministerial Group report in August 2017, the total debt of the telecom industry was 7.88 lakh crore that included exposures of Indian banks. The government has also sought legal opinion in the light of the recent verdict of the Supreme Court before it takes a final call soon, the officials said.