2011
COAI DISAPPOINTED BY BUDGET PROVISIONS FOR THE INDUSTRY.
Some points on which industry was expecting clarification are as under:
Direct Taxes
| Issue | Recommendation | Budget Outcome |
| 3G Business: Clarity on admissibility of Spectrum fees | Specific amendment in Section 32 and Appendix I to the IT Rules to clarify that the 3G spectrum fee payment qualifies as “Intangible asset”. | Not clarified |
| 3G Business: Treatment of interest cost incurred on capital borrowed for the purpose of acquisition of 3G Spectrum | Specific amendment to proviso to Section 36(1)(iii) to provide for capitalization of interest cost incurred on capital borrowed for the purpose of acquisition of 3G spectrum, upto the date of commencement of provision of 3G services. | Not clarified |
| 3G Business: Clarity on treatment of foreign exchange fluctuation on ECB’s arising on account of increase/reduction in liability incurred for payment of 3G spectrum fee or acquiring assets in | Specific amendment in the IT Act in section 43A with respect to deductibility / taxability of foreign exchange fluctuation on ECB’s arising on account of increase/reduction in liability incurred for payment of 3G spectrum fee or acquiring assets in | Not clarified |
| Prepaid issue | Discount offered to prepaid distributors should not be liable to TDS – alternatively a new reduced TDS rate say 1% can be prescribed for such discount. | Not materialized |
| Expenditure disallowed u/s 40A(i)(a) | Amend the provisions to the effect that No disallowance should be there under section 40A(i)(a) in case of payment of tax by the recipient of income | Not materialised |
| Time frame for disposal of appeals by Commissioner of Income Tax (Appeals) | On lines similar to DRP provisions, the Commissioner (Appeals) should be required to dispose off the appeal in time bound manner by amending provisions of section 250(6A). | No specific amendment |
| Requirement of PAN/ Form 60/61 | The requirement of quoting the PAN number at the time of taking a mobile connection, as per the Rule 114 B of the Income Tax Act has become redundant and should be dropped. | Not materialised |
| Section 80-IA - to companies undergoing reorganisation after 31 March 2007 | For the new licences issued after 31st March 2005, this period should be extended upto 01.04.2011. | Not materialised |
| Tax | Tax holiday benefits in case of mergers/ amalgamations should be continued and the provision should suitably be amended to provide that the benefit of the tax holiday would continue to be available to the undertaking as it would have been available had the amalgamation or demerger not taken place. Alternatively, Government could bring in the effective provisions to prevent misuse instead of doing away with the provisions altogether. | Not materialised |
| Infrastructure status for telecom Industry | Under New DTC, Telecom be classified as Infrastructure & benefits extended to the sector be available to this industry as well. | Not materialised |
Indirect Taxes
Service Tax - Point of Taxation Rules
· Point of Taxation Rules announced and made effective from 1 April 2011.
· These rules determine the point in time when the services shall be deemed to be provided for payment of service tax. General rule for this purpose would be earliest of the following dates:
- Date on which service is provided or to be provided
- Date of invoice
- Date of payment
· The above would require changes in the information technology system within 30 days for all business streams, other than for amount collected through pre-paid / recharge coupons. This change in IT systems appears to be very difficult, in which event, non-compliance would occur on payment of service tax effective 1 April 2011.
· These Rules should be deferred until introduction of GST, for want of time required for automation of information technology systems and possible re-engineering required again at the time of introduction of GST.
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