The recent budget proposal to impose a composite 20% levy called the Telecommunication Levy replacing a host of taxes has dropped the call charges by 20 cents, which has given some respite to the consumers may see more subscribers in the long term, analysts said.
“Earlier there were some four taxes such as Value Added Tax (VAT), Mobile Subscriber Levy (MSL), Nation Building Tax (NBT) and Environmental Conservation Levy (ECL). Then there was a 31% tax on telecom calls (for instance if consumers used to pay extra 31 cents for a Rs1 usage, now they pay only 20 cents),” Chanuka Wattegama, an Independent Telecom Policy Analyst told the Business Times.
Analysts said that the proposed tax has facilitated the subscribers to benefit from this move as now they are able to use 80% of what they pay to make calls as against to 69% previously.
They also noted that the reduction in the floor rate from Rs 2 per minute to Rs 1.50 per minute does not seem to have a big impact on the telecom companies as most of the telecom sector players are charging about the same amount.
Nikitha Tissera, Head of Research Sampath Securities noted that the exemptions on duties and VAT on high-tech equipment and machinery will provide incentive for investment in the telecom sector.