Telecom Industry Seeks USOF and Tax Reliefs in Union Budget 2024-25

The Cellular Operators Association of India (COAI), which represents significant commercial telecom providers, has made significant demands ahead of the FY25 Union Budget, including financial relief and strategic investments to support the telecom sector. The primary requests include relief from the Universal Service Obligation Fund (USOF) levy, a 16-year timeframe to recover business losses, and a reduction in licence payments to simply cover administrative costs.

COAI has urged for the abolition of the USOF levy, which currently stands at 5% of adjusted gross revenues (AGR) from telecom operators. In the absence of abolishment, the association proposes suspending the levy until the existing USO corpus is exhausted, emphasizing a need to reduce the burden on telecom operators. Additionally, COAI advocates reducing the license fee from 3% to 1% to cover only administrative costs, providing further financial relief.

With the FY25 Union Budget session scheduled for January 31 and Finance Minister Nirmala Sitharaman set to propose the budget on February 1, the telecom industry is looking for essential support to resolve financial limitations impeding sector growth. COAI emphasises that lowering levies is not only an economic imperative but also a strategic investment in India’s digital future.

COAI Director-General SP Kochhar observes that recent forward-looking changes indicate a constructive aim to build a strong and future-ready telecom sector. To properly realise this potential, the association recommends allocating enough budget resources for 5G deployment, network expansion, and fiberization, hence unlocking the crucial sector’s true potential.

The telecom industry is facing new problems with the introduction of satellite-based communication services and direct-to-mobile broadcasts. While carriers raise concerns about potential income consequences, the Ministry of Information and Broadcasting intends to conduct a pilot test of the technology in the coming months.

Aside from the USOF levy and licence fee reduction, the telecom industry seeks a variety of financial breaks, such as exempting service taxes on the assignment of the right to use natural resources, lowering customs duty on telecom equipment imports to zero, extending exemptions for vessels laying submarine cables, and GST exemptions on licence fees, spectrum usage charges, and spectrum acquisition fees.

As the telecom industry adapts to changing technology and faces new difficulties, COAI’s requests for financial relief and strategic investments in the FY25 Union Budget emphasise the sector’s critical role in furthering India’s digital objectives. The upcoming budget session has the potential to shape the telecom environment, create business prospects, and ensure a robust digital future.