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Policy & Regulation
Saturday, June 24, 2017
Telecom sector woes on AGR: Govt awaits 'favourable' SC verdict

Telecom sector woes on AGR: Govt awaits 'favourable' SC verdictTelecom companies with a licence need to pay about 8 per cent of their total revenue to government
To get the telecom sector a stable financial base, the government is waiting for a favourable verdict from the Supreme Court on the longest dispute in the sector, instead of tweaking interconnect charges or setting tariff rules, according to a top bureaucrat. As telecom minister Manoj Sinha is set to meet telecom company chiefs this week, the officials in the know said none of the options on the table, including changes in interconnect charges and tweaking of the tariff regime, would work without settling the adjusted gross revenue (AGR) controversy.

They are optimistic it can happen as the Telecom Regulatory Authority of India (Trai) and the department of telecommunications (DoT) are now working together to resolve this knot.

While AGR is administered by DoT, spectrum and tariffs are set by Trai and each blames the other for the impasse the sector finds itself in. Settling AGR is also convenient while setting tariff rules that Trai has proposed or demanding a softer reserve price for airwaves are politically difficult calls. Trai incidentally has made a presentation to the government on changing the tariff rules for the sector.

It has also helped that the Prime Minister’s Office has asked the two to ensure a viable and long term solution to the sector’s financial distress is hammered out. For the PMO this is urgent as the Digital India framework would depend on how the telecom companies perform. It is also linked to the proposed auction of 5G airwaves.

The DoT is now headed by Aruna Sundararajan, who is holding it as an additional charge. Interestingly, the inter-secretary panel, the telecom commission which takes the final call on most policy issues includes, Tapan Ray, who has joined as secretary in the department of economic affairs, recently. The one holding the longest tenure at the policy making levels now is Trai Chairman R S Sharma.

The AGR problem has a long history. It is about what constitutes gross revenue for a telecom company. In 11 years it has travelled through all courts in the country, including the Supreme Court, several high courts — the latest one being distant Tripura — to the telecom appellate body, the Telecom Disputes Settlement and Appellate Tribunal. It is again pending in the Supreme Court, expected to come up after the vacations.

Telecom companies with a licence need to pay about 8 per cent of their total revenue to the government and that includes all the lines of business they may be involved in. It is in addition to the price they pay to buy spectrum, their usage and others but they have no ability to partner with any content player to earn additional revenue. A company offering the same bouquet of services but as a non-licensee freely replicates the same services. This means the latter can offer his consumers both voice and data services at a far less cost. The former regime, companies say, militates against fair play.

DoT has long held that the simplicity of the AGR regime has ensured no disputes about revenue payable from the sector, something which has been the bane for several sectors. Also, it has argued that the current stress in the sector has little to do with AGR per se and more with the high reserve price set for spectrum. The government has so far collected over Rs 3.6 lakh crore from the successive rounds of auctions which has been close to 25 per cent of its total non-tax revenue in the past seven years, a report by rating agency Icra notes. To make life easier for the telecom companies, DoT has suggested Trai could consider a softer reserve price in the ensuing auctions.

Sharma has suggested that AGR rules should be eased to carve out non-telecom revenues from the calculation. The regulator in a consultation paper said receipts from USO Fund, meant to finance expansion of rural telephony, capital gains from sale of fixed assets and securities, bad debts and dividend and interest income, should also be out of the revenue base. It had argued these will still not make the calculation of AGR difficult, something that DoT has repeatedly argued against.

Telecom sector analyst Mahesh Uppal says linkage of the fees payable by the telecom companies with realistic calculation of yearly revenues will reduce dependence on high reserve prices. “This will help design better spectrum auctions,” he adds. (Source: Business Standard)

Govt considers Apple’s request to allow after-sale servicing of refurbished phones

Govt considers Apple’s request to allow after-sale servicing of refurbished phonesUS-based mobile phone manufacturer Apple’s plea to be allowed to import refurbished phones has not been entirely rejected by the government. While the Department of Industrial Policy and Promotion (DIPP) has refused to allow the company to sell its second-hand phones in the country, the government is still open to its request of allowing used handsets to be imported to meet Apple’s after-sale service contract. “We are still looking at their proposal of being allowed to import refurbished phones to meet their after-sale service requirements. The discussions are still on in that matter,” a DIPP official told BusinessLine.

Allowing Apple to import its used phones into the country for meeting after-sale services requirement would essentially mean that the company be permitted to use the parts of such phones to service the i-phones sold in the country.

“The DIPP has received such requests before for products such as photocopy machines and printers, where foreign companies have proposed that they be allowed to import second-hand parts to service products sold in the country,” said another official. “However, a positive decision has not been taken on any of the proposals yet.”

The policy uncertainties notwithstanding, Apple started manufacturing its devices in India last week, at its Taiwanese contract manufacturing partner Wistron’s plant, in Bengaluru. (Source: The Hindu Businessline)

Small e-comm vendors will have to pay GST upfront

Small e-comm vendors will have to pay GST upfrontBudget hotels and small-scale vendors registered on ecommerce sites such as Airbnb, Flipkart and Amazon will have to pay tax upfront under the goods and services tax (GST) regime when they receive payments, even if they fall in the exempted category. That's because all vendors registered on such sites will be liable to 1 per cent tax collected at source. GST is on its way to being rolled out on July 1 with most goods and services having been slotted into their respective slabs by GST Council last week. The objective to impose 1 per cent on these sites is to capture all transactions in the ecommerce space and not allow anything to slip through the cracks.

All ecommerce players are bound by law to deduct tax from registered vendors whenever there is a sale, irrespective of whether the seller is liable to pay tax or not. They will withhold 1 per cent whenever the payment is made to the seller. The GST Council has decided to exempt hotels with room tariffs up to Rs 1,000 per day as also a number of household goods.

Those below a turnover threshold of Rs 20 lakh are also exempted under GST. They will have to claim refunds subsequently from the tax department. "If anyone does not have a liability, they can claim a refund," said an official.

"As very few sellers fall within the Rs 20 lakh bracket this is not a big worry for us. We have also welcomed the tax rate. The areas which need clarification are what happens in case of a return. Also, stock transfer is a matter of concern for us as," said a spokesperson of the All India Online Vendors' Association (AIOVA), a group of 2,000 sellers.

Tax experts said this would put small vendors at a disadvantage as their working capital will get blocked.

"In transactions through an ecommerce operator, the compliance shall increase in the GST regime, more so for small service providers," said Bipin Sapra, partner, EY. Sapra said vendors will have to get registered to claim refunds of the tax collected at source by the ecommerce operator. (Source: Economic Times)

Trai asks Telecom Department to 'revisit' Right of Way rules

Trai asks Telecom Department to 'revisit' Right of Way rulesThe telecom regulator has asked the telecom department (DoT) to ‘revisit’ its Right of Way (RoW) rules whose terms imply tower companies such as Bharti Infratel, Indus Towers and American Tower Corp are excluded from seeking benefits under the rules. It warned that such an exclusion would lead to a slowdown in tower installations, hurting quality of services. “Exclusion of IP-1s (infrastructure providers) from the said (RoW) rules will not only affect provisioning of duct and optical fibre cable (OFC) but will also result in slowdown of tower installation,” Sudhir Gupta, secretary at the Telecom Regulatory Authority of India (Trai), wrote in a recent letter to the DoT secretary, a copy of which was reviewed by ET.

The government, in its Right of Way (RoW) policy unveiled on November 15 last year, allowed only a ‘telecom service licensee’ to seek Right of Way. With this, telecom infrastructure providers such as Indus Towers, Bharti Infratel, American Tower Corp (ATC), Tower Vision and GTL Infrastructure, which deploy mobile telephony towers for licensed telecom service providers, were excluded from seeking RoW.“The infrastructure providers are registered with DoT and provide telecom infrastructure to only telecom service provider.

The IP-1s have played a pivotal role as far as provisioning of passive infrastructure is concerned,” Gupta said. Citing data from Towers and Infrastructure Providers Association (Taipa), Gupta added that the tower companies have installed more than 4.5 lakh towers and nearly 15 lakh base transceiver stations, which is increasing at 5% on-year. Taipa represents telecom tower companies.

“Keeping the above in mind, the Authority is of the view that there is an imminent need to revisit the RoW rules and IP-1s should be made eligible to seek/avail Right of Way facility/permisision,” the Trai secretary said. Telecom tower companies have been demanding inclusion in RoW policy, and have made several submissions to the government.

Taipa director general TR Dua told ET that IP-1s are key players in implementing the government’s flagship initiatives such as Digital India and Smart Cities as the tower companies can significantly accelerate telecom infrastructure rollout. “The exclusion of IP-1s from the rules is arbitrary and retrograde and will lead to delay in rollout of telecom infrastructure across the country.

Further, this is seriously impeding the future rollout of the telecom infrastructure, besides effecting the investment in telecom infrastructure sector. This, further, impacts financial health of infrastructure providers,” Dua said.

The infrastructure provider (IP) industry that has invested `2.5 lakh crore in the country was created in 2000 and is registered with the DoT for implementation, maintenance and leasing of passive infrastructure— mobile towers and fibre-based networks—for telcos catering to 1.1 billion Indians. The development comes at a time when infrastructure firms too are undergoing massive consolidation in tandem with the service industry, which is operating under intense financial pressure amid amid drop in revenues following Reliance Jio’s foray in September 2016. In 2016, Boston-based ATC acquired a controlling stake in Kolkata based Srei Infrastructure-promoted Viom Networks at Rs.7,635 crore, while Reliance Communications is selling a controlling stake in its tower unit to Canada’s Brookfield. (Source: Economic Times)

Airtel, Jio spar over time taken to comply with Trai order

Airtel, Jio spar over time taken to comply with Trai orderThe conflict between Bharti AirtelBSE -0.15 % and Reliance Jio Infocomm heated up as the country’s no. 1 telco accused its rival of violating the Telecom Regulatory Authority of India (Trai) order to stop the Summer Surprise offer and urged the watchdog to take “suitable action.”

Newcomer Jio in turn pointed to its April 6 statement that said the telco would comply with the regulator’s directive and is in the process of withdrawing the Summer Surprise offer as soon as it is “operationally feasible.”

Bharti AirtelBSE -0.15 % said the new entrant should have stopped the offer immediately. “We are surprised that Reliance Jio is openly continuing with its Summer Special offer despite the same being declared ab initio void by the Trai,” a Bharti Airtel spokesperson told ET in an email on Sunday. “In addition, Reliance Jio is running an aggressive campaign via social media and on ground as well as digital flyers encouraging customers and channel partners to subscribe and recharge under the scheme.”

The company, which kicked off commercial services in September, was in breach of the regulator’s instruction, Bharti said. “This is a flagrant violation of Trai’s unambiguous directive and it is clear the extension is invalid for all customers who have recharged after the regulatory order came into effect,” Bharti said. “We are sure the honorable regulator will take suitable action against this violation.”

Jio, while agreeing to comply with the order, has maintained that it’s broken no laws. “All the customers who have subscribed to Jio Summer Surprise offer prior to its discontinuation will remain eligible for the offer,” Jio reiterated on Sunday.

“There is no reason, even technical, why Jio’s Summer Surprise could not have been stopped immediately, post the Trai order,” said a top executive at one of India’s largest telcos.

Several retailers in Mumbai and Delhi told ET that Sunday may be the last day for availing of the offer but were unsure if it wouldn’t be available Monday. At stake are significant numbers of people Jio wants to add to its 72 million user base. Incumbents meanwhile want Jio to start charging for services as soon as possible to allow them to draw up pricing strategies to protect their user base.

Jio’s rivals haven’t decided on making an official complaint to Trai, which said Summer Surprise offer did not fit into “regulatory framework.” It had also said Jio’s explanations hadn’t been satisfactory.

Vodafone India and Idea CellularBSE 0.40 % didn’t respond to emailed queries. Trai had said on April 7 that Jio will stop the offer but since it’s a “large network, it takes some time. We are saying to stop it in a shortest possible time and it can be few hours, a day or a day and half but it can’t be April 15.”

Rajan Mathews, director general of the Cellular Operations Association of India (COAI), declined to comment specifically on the issue.

“If there are loopholes (in Trai’s order), then it is for Trai, as a vigilant regulator, to be aware of these and identify them and close the loopholes immediately,” said Mathews. “Those who become aware of these loopholes, should in turn, inform the regulatory authority, with the hope that it will then act to close these loopholes.”

Even if the offer is withdrawn a few days before April 15, Jio may still emerge the winner, analysts said. Assuming that Jio takes three-four days to alert its distributors, channels, partners and the public on the stoppage, that would still give it 10 days out of the 15 that were planned for the offer.

Early closure will probably lead to a rush of people wanting to sign up before the end.

Jio’s two successive free offers that ended March 31have damaged incumbents, which have been forced to cut voice and data rates sharply while needing to invest in capital expenditure, hurting revenue and profitability. Industry debt has ballooned to nearly Rs 4.90 lakh crore. The financial stress, the government has said, has eroded revenue from licence fees and spectrum usage charges.

The legality of Jio’s offers and Trai’s decision to clear them are being challenged in the high court and the telecom tribunal, which has asked the regulator to revisit its decision. Jio has maintained all its plans are in line with the rules. (Source: Economic Times)

Telecom Coordination Committee to Redress Mobile Tower Grievances in Gurugram

Telecom Coordination Committee to Redress Mobile Tower Grievances in GurugramA city-level 'Telecom Coordination Committee' would be set up soon to redress grievances related to mobile phone towers in Gurugram, a senior civic official said today. The committee would be constituted to get levels of EMF (Electromagnetic Field) radiation from such towers checked by Telecom Enforcement, Resource and Monitoring (TERM) cells within one week of receipt of complaint.

"A City-level Telecom Coordination Committee will be constituted to get levels of EMF radiation from such towers checked..," said Commissioner, Gurugram Municipal Corporation, V Umashankar.

This was divulged by the official during an awareness programme organised by Department of Telecommunications, Central Government in Gurugram, a press release said. (Source: NDTV)

Mobile Users, New And Old, Will Soon Require Aadhaar For Verification

Mobile Users, New And Old, Will Soon Require Aadhaar For VerificationAfter drivers' license, Aadhaar-based re-verification has been made mandatory for all existing subscribers of mobile phone services, with the government instructing telecom operators to initiate the process. Members of the Cellular Operators Association of India may meet later this week to discuss the modalities or rolling out the verification process for over a billion users, which - they say - is expected to cost them nearly Rs. 1,000 crore. "All licensees shall re-verify all exiting mobile subscribers (prepaid and postpaid) through Aadhaar-based eKYC process," said a telecom department notification.

Last month, the Supreme Court had observed, "an effective process has been evolved to ensure the identity verification" for new users. It added that "in the near future, and more particularly within one year from today, a similar verification will be completed, in case of existing subscribers." Licensees, or the cellular operators, will have to inform existing users about the Supreme Court order for the re-verification process. They have also been directed to upload the execution details on their respective websites.

For the re-verification through Aadhaar, the operator will have to send a verification code to the subscriber's number. The operator will, then, have to verify this code from the subscriber so as to confirm whether the SIM card of the connection is physically available with the subscriber.

"After the completion of the eKYC process, before updating or overwriting the old subscriber detail in database with the data received through eKYC process, the licensee will seek confirmation from the subscriber about the re-verification of his/her mobile number after 24 hours through SMS," the notification said.

The operator can re-verify more than one mobile connection in one service area through a single eKYC but not bulk connections. For issuing additional mobile connections to re-verified subscriber, the operator would have to follow a separate eKYC process.

However, verification of a subscriber would not be required in case of conversions - that is prepaid to postpaid connections or vice versa, the notification clarified.

The government has, in the recent past, said that Aadhaar cards will be made mandatory for filing tax returns and applying for driving licences. (Source:NDTV)

E-commerce firms to pay up to 1% TCS under GST

E-commerce firms to pay up to 1% TCS under GST E-commerce firms like Snapdeal and Amazon will have to mandatorily deduct up to 1 per cent TCSBSE -0.31 % (Tax Collected at Source) while making payments to their suppliers under the GST regime which is expected to kick in from July 1. The model Goods and Services Tax (GST) law, finalised by the GST Council, provides for 1 per cent TCS to be deducted by the e-commerce operators. The model law provides that every electronic commerce operator, not being an agent, shall collect up to one per cent TCS, as may be notified on the recommendations of the Council, of the net value of taxable supplies made through it by other suppliers where the consideration with respect to such supplies is to be collected by the operator.

Experts had raised concerns saying this would mean that a similar amount will have to be levied on inter-state movement of goods, taking the total TCS deduction to 2 per cent. "We have included the word 'up to' in the final model GST law. This would mean that TCS would not exceed 1 per cent of the sale proceeds," an official said.

Industry has been expressing concern over the TCS provisions saying it would mean a lock-in of capital and also dissuades companies from selling through online aggregators.

E-commerce companies will also have to file returns on the TCS deductions, but in case of return of goods by the consumer, these companies will not have to deduct TCS as there is no actual sale.

The model law had defined 'electronic commerce' as supply of goods or services, including digital products, over electronic network.

'Electronic commerce operator' would mean those persons who own, operate or manage digital or electronic facility or platform for electronic commerce. (Source: Economic Times)

H-1B priority suspension: Indian companies would have to better plan its onsite staffing in US

H-1B priority suspension: Indian companies would have to better plan its onsite staffing in US The US decision to suspend priority processing of H-1B visas would require Indian companies to better plan onsite staffing of critical resources, as the move would mean longer waiting time for employees to be deployed at client locations.
A statement on Friday from the US Citizenship and Immigration Services (USCIS), the agency that oversees lawful immigration to the United States, said it would temporarily suspend premium processing for all H-1B visa petitions from April 3. Premium processing is akin to "tatkaal" scheme for H-1B visas: A decision is made on each application within 15 calendar days for a fee of $1,225 under this programme. In the normal course, an application usually takes between three to six months for processing.

USCIS said the suspension may last up to six months and will help it "process long-pending petitions that we have currently been unable to process due to high volume of incoming petitions and the significant surge in premium processing requests over the past few years; and prioritise adjudication of H-1B extension of status cases that are nearing the 240 day mark." Experts believe the move would slow down onsite deployment of skilled professionals from India.

"This slows the professional down by three months. The impact will call for a lot more forward planning for companies. In many cases, H-1Bs are often needed quickly so this will create significant difficulties for India IT firms dealing with US clients. I anticipate a huge influx of visa application between now and April 1," Phil Fersht, chief executive at research firm Horses for Sources, told ETin an email response.

At present, the US has a cap of 65,000 visas for the general category under H-1B visas and allows a further 20,000 people who have a US master's degree from an accredited institution to also apply. The USCIS uses a computer-generated process, also known as the lottery, to randomly select the petitions.

IT industry body National Association of Software and Services Companies agreed the suspension would create some process delays for the companies - Indian and American - but does not see it as a significant impediment. "This has happened in the past for a couple of months to clear the backlog and we will work with the US Embassy in India to ensure that mobility of skilled talent is not affected due to process issues," Nasscom told ET in an email response.

The most impact to the IT industry will be on fresh H-1B applicants, said Rajiv Dabhadkar, founder of the National Organisation for Software and Technology Professionals, which works for Indian workers overseas.

"Applications will be scrutinised more now.There will be an impact on next year's lottery because of this greater scrutiny," he said. Tata Consultancy ServicesBSE -1.03 %, the largest Indian software exporter said it does not disclose the number of H-1B premium processing requests it raises in a year. An industry analyst who did not wish to be named, however, said TCS had in the past told investors that it files very few such applications.

Infosys, Wipro, HCL and Tech Mahindra didn't respond to a request for comment for this report. The timing of the USCIS announcement, within hours of an Indian foreign ministry delegation saying it had received a positive response from the US on H-1B visas, also raised some eyebrows. (Source: Economic Times)

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