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GST: Secretary panel likely to seek licence fee cut, two year freeze on spectrum dues - GST Station

GST: Secretary panel likely to seek licence fee cut, two year freeze on spectrum dues

GST: Secretary panel likely to seek licence fee cut, two year freeze on spectrum dues

    A panel would look at the issue of AGR dues after telcos approached the Supreme Court for relief.

    NEW DELHI: The Committee of Secretaries (CoS) is likely to recommend a reduction in the licence fee paid by telecom companies and allowing a two-year moratorium on spectrum payments, as part of measures to grant relief to the debt-laden sector, said three people familiar with the matter.

    One of the persons said the panel is set to suggest bringing down licence fee to 5% of adjusted gross revenue from 8%. However, all GST-related matters, including refund of input tax credit and reduction in tax rate, are likely to be referred to the GST Council.

    A person familiar with the committee’s thinking said there was consensus within the panel as well as at the highest levels of the government that the telecom market needed three private players, apart from staterun operators.

    However, the incumbent telecom operators are unlikely to be satisfied with only these measures, and want the committee — headed by cabinet secretary Rajiv Gauba — to take a speedy call on providing relief on the adjusted gross revenue (AGR)-related dues, said another person.

    A senior telecom executive said the government also needed to find a mechanism to raise tariffs which, combined with any relief on AGR-related dues, will be the booster shot desperately needed by an industry singed by a threeyear price war and over Rs 7 lakh crore of debt.

    An official said the panel would look at the issue of AGR dues after telcos approach the Supreme Court for relief and the apex court rules on their petitions. Airtel and Vodafone Idea are expected to file review petitions soon.

    One of the persons said other internet service providers (ISPs) as well as non-telecom companies, which own telecom licences, are also expected to file review petitions.

    The issue of raising tariffs is being left to the telecom regulator.

    “While the government has the powers to issue instructions to the Telecom Regulatory Authority of India (Trai), that is not the preferred option,” said one of the persons.

    Pricing, which falls under the ambit of Trai, has been under forbearance for the past 16 years.

    The October 24 Supreme Court ruling to include non-core items in AGR left telcos facing at least Rs 1.3 lakh crore in additional licence fees, spectrum usage charge, penalties and interest. Of this, loss-making Vodafone Idea and Bharti Airtel — the only two surviving old private telcos — are facing combined dues of over Rs 80,000 crore that need to be paid in less than three months. New entrant Reliance Jio is the third private telco, and the only one making profits.

    “The committee is likely to propose lowering the Universal Service Obligation Fund (USOF) component of licence fee to 3% from 5%, and the pure licence fee component to 2% from 3%,” said one of the persons. He added that this would bring down the overall licence fee for telcos to 5% of AGR. USOF comprises 5% of the 8% of AGR that telcos pay as licence fees annually.

    Also, “telcos may now need to pay only in FY22 for all payments arising in FY21and FY20”, said one of the persons. This alone could provide over Rs 40,000 crore of relief to the three telcos. GST-related matters such as refund of the Rs 36,000-crore input tax credit or adjusting it against future dues as well as lowering the tax rate to 12% from 18% would be referred to the GST Council, the person said.

    Besides Gauba, the high-powered committee includes secretaries of the departments of economic affairs, financial services, revenue, corporate affairs, telecom and IT, besides the CEO of Niti Aayog. The panel last met on Friday, and is believed to have cleared the proposals.

    Source- Economic Times.

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