Reduction/Removal in Service Tax may help Indian government achieving vision of low cost communications services

01:17:00
For the last few quarters, post India New Telecom Policy-12, there is rounds of industry visionary discussions about the positives and negatives impacts on mobile operators and subscribers. In cabinet approved policy, the national roaming is going to be free by March 13 enabling subscribers to pay one tariff across mobile operators’ service area. It removes the different pricing model in different geographies of service area based on the service area based subscriber paying capacity. The recent tariff increase by the incumbent mobile operators did not go well with regulators and ministry. Recently, Communication and IT minister Mr.Kapil Sibal came out with strong statement about the mobile operators move and stressed that government would take all necessary action to make sure low communication service for subscriber. I agree that subscribers should get the best possible tariff with highest level of quality of service. The mobile operators’ association; COAI as well as all major operators came out and highlighted that it is getting increasingly impossible to keep on investing on network capacity, QoS, in the dynamically changed environment. In case government really want to reduce the experiencing cost on subscriber, there is always an option with government to reduce service tax and it would not hurt mobile operators financially. It would neutralize any recent hikes in tariff by mobile operators to be viable in the competitive market place. The reduction is going to help mobile operators to generate cash through recent hikes and invest back in economy in one or another way whereas government may opt for reduced or abolished service tax on telecom services. In the past few years, telecom is considered as cash generating sector for government to reduce their fiscal deficit as well as fulfil other social responsibilities. It’s correct that, any reduction in service tax would impact cash strapped government dearly with more than $3Bn of lost revenue. I believe that mobile operators invested years and billions of $ to create deep down network capabilities and reach. In case, the government vision is to offer low cost telecommunications services to masses then it should not only be expected from mobile operators’ expenses.

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