The country’s over 900 million mobile phone users will have to shell out more money on their bills with the proposed hike in service tax rate to 12 per cent from 10 per cent in the Budget today.
GSM lobby Cellular Operators’ Association of India (COAI) said the increase in service tax is detrimental to the objectives of rural penetration and affordable rates for the consumers.
“The increased costs will eventually be borne by the consumers in the form of higher charges for the services,” COAI said.
Country’s largest telecom firm Bharti Airtel said the hike in service tax will increase cost of services to customers and also impact the P&L (Profit and Loss) statement of telecom companies.
“The telecom sector is already burdened with multiple and high tax levies which account for 30% of the telecom services revenue…As a highly taxed industry,this will certainly have a further impact on the consumer,” Bharti Airtel CEO (India and South Asia) Sanjay Kapoor said.
Saying that while many systemic elements have been set right in the 2012-13 Union budget,numerous challenges continue to impact the (telecom) industry,Sistema Shyam TeleServices Limited President and CEO Vsevolod Rozanov said.
“Increase in service tax from 10 per cent to 12 per cent would increase cost of ownership of a mobile phone,” he added.
Telecom also expressed disappointment as no specific announcements related to the sector were made in the budget.
“From a global perspective,the Indian telecom industry continues to attract the highest tax rate of 23 per cent… It would have been good,if this could have been rationalised as the industry is clearly getting squeezed on account of such outflows and the hesitation of banks to lend money to operators makes the situation all the more difficult,” Rozanov said.
The telecom operators have been raising concerns about squeezed margins on account of high operational costs. Mobile phone usage rates in India are among the cheapest globally.
Rozanov added that this would have a deep impact on the roll out of voice and data services for the common man,specially in the rural areas.
COAI,however,welcomed the move provisioning infrastructure funding,including that for cellular towers,Optical Fibre Cables (OFC) and cables to work through Gap funding.
This is expected to bring down the operating capex considerably for operators,COAI said adding that “provision of mobile tracking for fertiliser subsidy also looks to be favourable.”
Mobile handset makers welcome Budget New Delhi,Mar 16 (PTI) Mobile handset makers today welcomed Budget 2012-13 retaining the excise duty of one per cent on cellular phones.
“The Finance Minister has recognised mobile phones as merit goods. There is no increase in duty but the prices (of mobile handsets) will remain the same. The benefit to consumer will be that prices will not go up,” Indian Cellular
Association National President Pankaj Mohindroo told PTI.
Finance Minister Pranab Mukherjee announced to retain excise duty of one per cent on mobile phone,along with three other product categories which include coal,fertilisers and precious metal (gold and platinum) jewellery.
Retaining the excise duty to same levels will support government’s service delivery initiatives,Director (Sales) of Nokia India,V Ramnath,said. However,he could not ascertain the impact that the budget announcement will have on handset prices.
“At this moment,it is too early to evaluate impact on prices,” Ramnath said.
Though Samsung did not comment on the impact of the budget announcements on handset prices,its spokesperson said,”The budget has not offered any relief to the sector which is already reeling under high taxes. We do not expect positive impact on the consumer buying sentiment.”
The Finance Minister also announced to reduce excise duty
on parts of mobile phones,other than those cleared to a manufacturer of mobile phones,from 10 per cent to 2 per cent only in cases where the no central VAT credit is taken by manufacturer.
The government has also announced to exempt parts of memory cards from basic customs,countervailing and special addition duty (SAD),the benefit which given to parts,components and accessories for manufacturing of mobile handsets.
“Exemption of mobile phone parts from basic custom duties which while bringing down the manufacturing cost of mobile phones will aid in deeper penetration of mobile phone manufacturers into the untapped portions of the Indian market,” Karbonn Mobiles Managing Director Pradeep Jain said.
Lava Mobile said that government’s announcement to allow deduction of 200 per cent tax liability on expenditure made in research and development will boost growth of home-grown handset companies and generation of Indian Intellectual Property Rights.
“Government has provided benefits for companies like us to invest on a core of R&D because for manufacturing and R&D services there is an increase in deduction of income tax from 150 per cent to 200 per cent,” Co-Founder and Director,Lava International SN Rai said.
Rai added that on implementation of GST,the company may also decide on setting up of manufacturing base in India.