Did Budget 2015 help India’s incentive-starved Telecom Sector?

The Finance Ministry has long acknowledged the significance of the telecom sector in the growth of the economy. However, many of the sector’s growth centric demands were clearly looked over in the Modi Government’s first full-fledged budget – the Budget 2015.

As a recap, here’s what the Budget 2015 had for the sector -

Direct Tax Highlights:
· Tax on royalty and technical services payments made to non-resident parties down from 25% to 10%
· General Anti Avoidance Rules ('GAAR') Extended to 2 years
· Rationalization of indirect transfer tax provisions under section 9(1)(i) of the Income-tax Act
· Corporate tax rates phased reduction over the next 4 years

Indirect Tax Highlights:
· Excise duty hike on mobile handsets up from 6% to 12.5%. Imports became 6.5% costlier. That helped Make in India.
· Service tax hiked to 16%. Services got costlier for subscribers.
· Exemption from Special Additional Duty ('SAD')

While the direct tax proposals helped, Budget 2015 failed to excite many Industry players. That’s because GST got delayed further, every remittance made to overseas parties still has to be reported and administrative hassles remain.

Some of the key demands of the industry fell by the roadside amidst expectations soaring high. There were no specific incentives, and no rationalization of royalty provisions. Big telcos have been facing protracted litigation about the applicability of withholding tax provisions to margins allowed to independent distributors.

Amidst all the dark clouds the announcement to implement GST from April 1st, 2016 is a welcome step. Let’s hope Budget 2016 offers some positive amendments for taxpayers and companies.

Image credits: Indiatimes