GSM, CDMA firms seek refund of unused cenvat credit in budget

NEW DELHI: Mobile phone companies operating on both GSM and CDMA platforms have urged the finance ministry to allow for refund of unused Cenvat credit in the upcoming budget.
Cenvat (central value-added tax) credit is a tax set-off paid on inputs. In a joint letter to the ministry, the Cellular Operators Association of India (COAI) and Association of Unified Telecom Service Providers of India (Auspi) have demanded that “credit in respect to business-related expenses be allowed and that credit of duties and taxes paid on goods and services used for corporate social responsibility activities be available as such expenses are now mandated by the Companies Act”.

COAI is the lobby representing GSM operators like Bharti Airtel, Vodafone India and Idea Cellular, while Auspi represents CDMA operators like Sistema Shyam Teleservices and dual tech operators such as Reliance Communications and Tata Teleservices. The lobby groups said service operators “invest huge sums in capital assets for putting up telecom networks, and the service income from such businesses is lower in the initial phase, resulting in huge accumulation of unused Cenvat credit”.

“A new rule may be inserted in the credit rules for claiming refund,” said the industry bodies in their letter to the finance ministry. COAI and Auspi have voiced their uneasiness about the current law on the time limit for receipt of payment for export of services. The time limit for receipt of payment in foreign exchange for service to be treated as export should be taken as 36 months, instead of nine months, they said. Separately, Sistema Shyam Teleservices CEO Dmitry Shukov felt the government should also pave the way for a unified taxation structure and dispense with the regime of multifarious taxes, charges and fees payable by telecom operators.

He told ET that the telecom sector annually pays licence fees of 8%, spectrum usage charges between 3% and 10%, service tax at 12.36% in addition to other corporate and municipal taxes. Shukov also reiterated the debt-laden sector’s appeal for a graded cut in an operator's annual payout to the Universal Services Obligation Fund (USOF) to 1% of annual revenue from 5% now. “Considering that over Rs 25,000 crore is lying unused in the USOF kitty, DoT should consider a reduced levy to 1% of revenue in a phased manner,” said Shukov.