New Delhi: The department of telecommunications (DoT) is set to bring the country’s Internet service providers (ISP) under the ambit of the uniform licence fee starting next fiscal.
“A uniform licence fee of 8% of adjusted gross revenue (AGR) shall be adopted for all ISP and ISP-IT (Internet telephony) licences, in two separate steps starting 2012-13, (with effect from) 1 July 2012,” according to a draft note of the telecom department. The proposal was announced by communications minister Kapil Sibal in February.
According to DoT, AGR will include all types of revenue from Internet services that a licence holding company gets. The only deductions allowed are revenues that don’t accrue to the company. These include pass-through charges that go to another company and taxes that go to the government.
According to the note, verified by a senior DoT official who requested anonymity, companies with ISP licences that don’t include Internet telephony will pay 4% of their AGR as licence fee for the period between 1 July 2012, to 31 March 2013. ISPs currently don’t pay any revenue share to the government. After 31 March, 2013, the licence fee will rise to 8%.
Similarly, companies with ISP licences that allow Internet telephony, and currently pay 6% of AGR as licence fee to the government, will see their outgo rise by 1% for the period between 1 July 2012, and 31 March 2013. After this, the revenue share will rise to 8%.
DoT has put in place a minimum presumptive AGR clause, to be announced every year after review by the Telecom Regulatory Authority of India (Trai).
Rajesh Chharia, president of Internet Service Providers Association of India (ISPAI), said the fact the government is imposing a 4% licence fee on ISPs from July, which will go up to 8% from April 2013, is the “last nail in the coffin for the industry which is yet to take off. They are imposing tax even before large-scale penetration of Internet could happen in India, especially in the rural areas where it is very low.”
He added that it will impact user penetration. Internet tariffs will go up and the government’s target of broadband penetration might not be met.
The government has set a target of 175 million broadband connections by 2017 and 600 million by 2020.
“The additional burden of 4% licence fee will be passed on to the customer. Every ISP will be impacted by this,” said Chharia.
Telecom operators will also see a change in the licence fee outgo. Starting 1 July, DoT will impose a fee ranging from 7% to 9% on operators depending on the category of the circle while from 1 April 2013, onward, the uniform fee of 8% will be charged, said the official cited above. They currently pay between 6% and 10% of AGR as licence fee, depending on the type of service they offer and the category of circle or mobile operating area applicable.
Meanwhile, the proposal to bring the country’s telecom tower companies under the ambit of the uniform licence fee is still under discussion.
On 21 May, in a letter written to DoT secretary R. Chandrasekhar, Umang Das, director general with the Tower and Infrastructure Providers Association, an industry body representing the telecom tower companies, asked that the present system of registration of tower companies continues and the move to a uniform fee be made optional for the tower companies.
The uniform licence fee was introduced by DoT in a bid to remove the incentive for arbitrage, which lay in the existing revenue share policy. Audits carried out by the empanelled auditors, hired by the DoT, found major discrepancies in the revenue reported by the telcos.