The Cellular Operators Association of India (COAI) has recently defended the telecom industry's push for increased mobile tariffs, citing a widening gap between network deployment expenses and revenue. This development highlights the ongoing challenges faced by telecom operators in balancing infrastructure investments with revenue generation.

Growing Investment-Revenue Gap

COAI Director General SP Kochhar revealed that the gap between infrastructure development costs and tariff revenue, which was previously around Rs 10,000 crore, continues to expand. This increasing disparity underscores the financial pressures faced by telecom operators in maintaining and upgrading their networks.

Challenges in Network Deployment

Despite government support through right of way policies, the industry faces significant hurdles:

• High fees charged by authorities for network deployment
• Increasing costs of infrastructure development
• Pressure to expand and upgrade networks to meet growing data demands

Data Pack Adjustments and Traffic Distribution

The COAI defended recent modifications to data packs in entry-level plans by some operators. Additionally, the association highlighted a crucial aspect of network traffic distribution:

The association argues that these large traffic generators, despite contributing significantly to network usage, do not pay for their utilization of the infrastructure.

Investment Benefits and International Profit Concerns

The COAI emphasized that telecom operators' investments primarily benefit Indian consumers. However, they expressed concern that these investments should not serve as profit mediums for international players who do not contribute to the costs.

As the telecom industry continues to navigate these challenges, the push for tariff increases reflects the sector's attempt to bridge the growing gap between infrastructure investments and revenue generation. The outcome of this situation could have significant implications for both telecom operators and consumers in the coming years.

In a significant ruling for the telecom industry, the Supreme Court has dismissed the Revenue Department's challenge to a Delhi High Court decision that classified mobile telecom towers as 'plant and machinery' rather than immovable property. This classification makes these towers eligible for input tax credit (ITC) under the Goods and Services Tax (GST) regime.

Key Points of the Ruling

• The Supreme Court rejected the Revenue Department's Special Leave Petition in the Bharti Airtel case.
• The court refused to allow differentiation between service tax and GST frameworks for telecom infrastructure.
• The ruling upholds the Delhi High Court's previous decision in favor of Bharti Airtel and other petitioners.

Implications for the Telecom Sector

This verdict brings clarity to a long-standing dispute in the telecom sector. The core of the controversy was whether telecom towers should be considered immovable property, which would have blocked them from ITC under Section 17(5) of the Central Goods and Services Tax (CGST) Act, 2017.

Industry Response

Tax experts have welcomed the Supreme Court's decision, highlighting its significance for the telecom industry:

1. Clarity on Infrastructure Treatment: The ruling provides much-needed clarity on the treatment of telecom infrastructure under GST law.
2. Alignment with Previous Rulings: It aligns GST law with previous service tax rulings, ensuring consistency in tax treatment.
3. Relief for Capital-Intensive Sectors: The decision offers relief to capital-intensive sectors that invest heavily in fixed infrastructure.

Impact on Telecom Companies

The ruling is particularly beneficial for telecom operators like Bharti Airtel and others who invest substantially in network infrastructure. By allowing input tax credit on mobile towers, the decision could potentially lead to significant tax savings for these companies, improving their financial position in a highly competitive market.

Broader Implications

This judgment may have far-reaching consequences beyond the telecom sector. It could set a precedent for other industries with similar fixed infrastructure investments, potentially allowing them to claim input tax credit under GST for such assets.

The Supreme Court's decision underscores the importance of clear tax classifications in promoting business growth and investment in critical infrastructure. As the telecom industry continues to expand and upgrade its networks, particularly with the ongoing 5G rollout, this ruling provides a supportive tax environment for future investments in mobile infrastructure.