TRAI proposes cuts to licence fees

7 Jan 2015

The Telecom Regulatory Authority of India (TRAI) has recommended that the Universal Service Obligation (USO) levy, which forms part of the annual licence fees paid by telecoms operators, should be lowered to 3% of adjusted gross revenue (AGR) from the current 5%. Live Mint writes that providers currently pay 8% of their AGR to the government as a licence fee with 5% going to the USO Fund and the remaining 3% contributing to state coffers. The TRAI’s proposed change will reduce the overall burden on providers to 6% without impacting proceeds to the government.

The TRAI has also recommended that earnings from non-telecom activities such as financial investments and property rents should be excluded from calculations of AGR. Under the regulator’s proposed policy, the AGR calculations will take into consideration taxes paid by the telco, as well as receipts from the USO Fund and non-telecom revenue streams in an effort to cut the licence fee burden on telcos. The methodology for AGR calculation is currently the subject of a major dispute between India’s tax authorities and the nation’s telecom service providers, after an audit claimed that five operators – Bharti Airtel, Vodafone India, Idea Cellular, Reliance Communications (RCOM) and Tata Teleservices (TTSL) – had under-stated their revenues for the 2006-2007 and 2007-2008 periods. The operators in question claim that the additional turnover was from non-telecoms sources and therefore not subject to the levy, whilst the Department of Telecommunications holds that the revenue should be included in the AGR, arguing that the turnover would not have been generated without the operators’ telecom licences or spectrum.