New Delhi, Feb. 28: The telecom subscriber will have to pay higher telephone bills due to the hike in service tax from 5 per cent to 8 per cent.
However, the telecom companies have been given a breather with the extension of the five-year tax holiday by another year. This benefit will be extended to the telecom service providers and domestic satellite service companies till March 31, 2004.
In addition, customs duty on various capital goods used by the telecom and IT manufacturing sector have been given the benefit of reduced customs duty from 25 per cent to 15 per cent.
Bharti Enterprises chairman Sunil Mittal said, “Overall, it is a good budget with a major thrust on infrastructure development including healthcare, which is good for the economy of the country. However the increase in service tax from 5 per cent to 8 per cent has to be seen in the light of an overall increase in the service tax to the consumer. Thus, there is the need to rationalise the licence fee structure for the telecom service providers becomes not only desirable but also imperative.”
S. Ramadorai, CEO of TCS, said, “For the telecom industry, the reduction in customs duty on capital goods and on optic fibre was on expected lines. However, the industry would have been immensely benefited had the duties on handsets been reduced. What has come as a real surprise is the increase in the service tax from 5 to 8 per cent. This is a cost, which would ultimately be borne by the telecom service user.”
The budget is a disappointment for those who had planned to buy a new mobile phone from an authorised dealer. Now the rush for handsets from grey market is all set to go up. Pankaj Mohindroo, president of Indian Cellular Association, said, “There is nothing for the cellular handset manufacturers. I am disappointed. The customers will continue to get attracted to the grey market. The price of mobile handset could have come down by Rs 500-4000 had the duties been brought down.”
The finance minister has also reduced the customs duty on fibre optical cable manufacturers from 25 per cent to 20 per cent. The import duty on e-glass roving a raw material used for making optical fibre, the finance minister has reduced the import duty on from 30 per cent to 15 per cent.
“The reduction in duty on optical fibre cables and capital goods is a good move for the entire value chain. Combined with the continuation of the tax holiday for another year, the budget is bound to give a boost to the industry,” said Mittal.