Panel recommends tax reforms for telecom sector

The working group formed to examine the telecom tax structure for the 11th Five Year Plan 2007-12, has recommended a slew of tax cuts for the telecom sector on September 5.

Recommendations include:

• 100% direct tax deduction for 10 years
  
• Reduction in service tax from the current 12% to 8%
  
• a license fee cut to a uniform 6% from 6-10% at present
  
• Complete waiver of customs duty on microwave equipment and
  
• Excise duty on locally manufactured telecom equipment to be pegged at the lowest level of 8%.
  
• Constitute a body to formulate a nation-wide policy for development of infrastructure and oversee the implementation of the same.

The government has set the ambitious tele-density target at 250 million connections by December 2007, from the present 11.75 per cent. In 2005-06, the total estimated budget support provided to the telecom department stood at Rs 171.43 billion, for the current fiscal the budget support has been increased by 13% over the previous estimated support.

The sector contributed 2.71% to the country`s GDP in 2005-06, slightly higher than its previous year (2.52%). Approximately, 4 lakhs employees were employed directly in the sector by 2005-06. The revenue of telecom companies has increased by 20% to Rs 867.