COAI: No major gain for telecom industry from corporate tax rate cut

NEW DELHI: The government’s move to lower corporate tax to 22 per cent is positive for the economy but there is no major benefit for the stressed telecom sector, according to industry body Cellular Operators Association of India.

In the fourth tranche of post-budget economic stimulus measures, Finance Minister Nirmala Sitharaman cut base corporate tax for existing companies to 22 per cent from the current 30 per cent; and for new manufacturing firms, incorporated after October 1, 2019 and starting operations before March 31, 2023, to 15 per cent from the current 25 per cent.

This will be subject to the condition that these companies will not avail any other incentive or concession such as tax holiday enjoyed by units in special economic zones (SEZs) and accelerated depreciation.

“The slew of measures announced by the finance minister have come as a much-needed gust of fresh air to resurrect and pump-prime the economy. The bold and positive move to rationalise the corporate tax structure will help kick-start the next big economic upcycle,” Bharti Enterprises founder and Chairman Sunil Bharti Mittal said in statement.

He said the move underlines the intent of the government under the leadership of Prime Minister Narendra Modi to maintain India‘s position as the hottest investment destination in the middle of adverse global developments and a slowing world economy.

In the biggest reduction in 28 years, the government slashed corporate tax by almost 10 percentage points as it looked to pull the economy out of a six-year low growth and a 45-year high unemployment rate by reviving private investments with a Rs 1.45-lakh crore tax break.

“We appreciate the government’s intent to help businesses with reduction in corporate tax rate. Reduction is positive for the industry but when it comes to specific sector like telecom, this does not translate into major benefit. It is good for those who are making profit. Telecom players are making losses,” COAI Director General Rajan Mathews told .

The telecom sector has been asking for reduction in licence fees, spectrum usage charges, goods and services tax (GST) and other charges as has been envisaged in the National Digital Communications Policy 2018.

“We have problem in the topline where we are paying 30 per cent tax to the government. We have been demanding lowering of GST from 18 to 12 per cent. There is nothing left in bottomline. A total of Rs 35,000 crore of GST refund is pending with the government. Relief in income tax is of no use if our topline problem is not addressed.” Mathews said.

Except Reliance Jio, all telecom operators including Bharti Airtel, Vodafone Idea, BSNL and MTNL are running in losses and laden with heavy debts.