NEW DELHI: India’s telecom sector which is facing the challenge of liquidity to enhance and expand telecom infrastructure to deal with the increased demand for telecom services, is expecting pricing support from the government in the form of Goods and Service Tax (GST) exemption from regulatory payments such as license fee, spectrum usage charges, amongst others in the Union Budget 2021-22, according to EY.

The sector is also facing a huge blockage of capital in the form of GST input tax credits (GST ITC) which remains utilized, and with 4G auctions fast approaching along with a probable rollout of 5G later this year, telcos are also seeking a refund of working capital blocked in unutilised ITC, the London-based professional services firm Friday said.

Moreover, demand for rationalisation of regulatory levies such as license fees and spectrum usage charges (SUC) has also been a long-standing expectation from the government.

Telecom companies are also expecting a removal of the time limitation or an extension of the time for claiming MAT credit which they could not claim due to losses in recent years.

EY highlighted that despite the approval of PLI scheme for telecom manufacturing in India, there is a need to rationalise the duty on imported equipment till the time a local ecosystem is established to sustain domestic manufacturing requirements.

Investment incentives under direct tax laws in the form of accelerated depreciation or investment allowance, according to it, would also provide much-needed impetus to foreign telecom equipment manufacturers to set-up manufacturing facilities in India thereby providing a further boost to the make in India initiative.

“In order to keep up with the pace of development, it is necessary for the government to extend its support in turning the long-overdue requests of telecom players into reality. With this, the telecom sector is keenly looking forward to the upcoming Budget 2021 and is hopeful that antidote to the sector’s woes is effectively delivered by the Finance Minister,” said Vishal Malhotra, Tax Partner and Telecom Tax Leader, EY India.

The advisory firm also expects reforms in the retrospective amendment introduced in 2012. It suggested that a tax rate of 1% be prescribed for margins for telecom distributorship services.