TRAI suggests lower SUC, 5 per cent GST rate

On SUC, the Trai has reiterated its September 2015 and January 2016 recommendation wherein it had suggested that there should be a flat rate of 3 per cent on auctioned spectrum. However, operators are now pressing for a rate of 1 per cent.

By: ENS Economic Bureau | New Delhi | Published:July 1, 2017 2:47 am
TRAI, gst, telcom, telcom regulatory authority of India, gst effect, gst and telecom, No commitment on increasing the termination charges

Ahead of the government appointed inter-ministerial group (IMG) finalising its recommendations, the Telecom Regulatory Authority of India (Trai) has suggested a slew of relaxations for the operators, which include lower licence fee and spectrum usage charge (SUC); a longer tenure to pay for spectrum acquired through auctions along with lower initial upfront payment; and a GST rate of 5 per cent by declaring telecom as infrastructure sector against the 18 per cent fixed by the government currently.

The recommendations for these relaxations by Trai, which have been sent to telecom secretary Aruna Sundarajan, were compiled after its meeting with the CEOs of the telecom firms on June 15. However, Trai has not committed anything on increasing the termination charges to cover its full cost and on which there’s a difference between the incumbents and Reliance Jio as it said that it is already in midst of a consultative process on this and would come out with its recommendations in due course.

While fixing termination rates is the sole jurisdiction of Trai, other issues being policy matters the final call would rest with the government.

In fact, on matters like lowering licence fee, SUC and longer payment period for spectrum acquisition, Trai has reiterated its past recommendations wherein it had batted for such measures.

For instance, on lowering licence fee it has suggested that it be brought down to 6 per cent from the current 8 per cent of the adjusted gross revenue of the operators. The current 8 per cent includes 5 per cent which goes in Universal Service Obligation. Trai had in 2015 suggested that the USO component be reduced to 3 per cent, thus bringing down the licence fee to 6 per cent, and not changing the amount that directly accrues to the government. However, the industry has urged for a licence fee of around 3 per cent.

Similarly, while recommending a longer tenure for payment of spectrum amount, Trai has reiterated its 2015 and 2016 recommendation wherein it had said that operators be initially asked to pay only 10 per cent of the bid amount, then be given a two-year moratorium followed by 18 equal instalments with interest spread over 18 years. Currently, the government charges 25 per cent or 50 per cent (depending upon the spectrum band) of the bid amount, followed by 10 equal instalments with interest spread over 10 years.

Here, operators like Bharti had urged for increasing the moratorium to five years from the current two and instalments to 15 years from the current 10. Idea had urged that the number of instalments be increased to 20 years to make it co-terminus with the validity of licence period. However, Reliance Jio had urged that deferred payment be done away with as it led to irrational bidding.

On SUC, the Trai has reiterated its September 2015 and January 2016 recommendation wherein it had suggested that there should be a flat rate of 3 per cent on auctioned spectrum. However, operators are now pressing for a rate of 1 per cent.

At a time when telecom operators have been batting for a lower 12 per cent GST rate for telecom services, Trai has gone ahead and advised the telecom department to take up with the finance ministry for a still lower rate of 5 per cent by declaring telecom sector as core infrastructure sector and economy enabler in the country.  (with inputs from FE)

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