New Delhi: As India strides towards becoming a global digital leader, the Cellular Operators Association of India (COAI) has presented a robust set of recommendations for the Union Budget 2025-26. These proposals aim to alleviate the financial burdens on Telecom Service Providers (TSPs) and create an ecosystem conducive to sustained digital growth.
COAI has unveiled its recommendations for the Budget FY2025-26, urging the government to address critical financial and regulatory challenges faced by the telecom industry. Representing the core of India’s digital communications ecosystem, COAI’s proposals aim to bolster the financial health of TSPs and pave the way for sustained digital growth.
These recommendations come in the wake of a substantial budget allocation to the Department of Telecommunications (DoT) in FY 2024-25.
A Glimpse at Last Year’s Budget
In the financial year 2024-25, the DoT received an allocation of Rs 1,11,915 crore, marking a 14 per cent increase over the revised estimates of FY 2023-24. Notably, 79 per cent of this budget was directed towards supporting state-run telecom entities BSNL and MTNL.
This allocation accounted for 2.3 per cent of the total central government budget, reflecting the sector’s importance. Despite this, industry experts, including COAI, have consistently highlighted the need for structural reforms to ensure the sector’s financial sustainability.
Key Recommendations for FY 2025-26
Abolishing Regulatory Levies
COAI has called for the abolition of the Universal Service Obligation Fund (USOF) levy, which constitutes 5 per cent of the Adjusted Gross Revenue (AGR) of TSPs. With over Rs 86,000 crore lying unused in the USOF corpus, the association suggests either abolishing or suspending the levy until the existing funds are exhausted. Additionally, it recommends reducing the license fee from 3 per cent to 1 per cent, aligning it with the administrative costs borne by the DoT.
The association also emphasised the need to redefine Gross Revenue (GR). The current definition, encompassing all telecom activities, has led to ambiguity and financial stress. “Revenue from activities for which no license is required should not be a part of GR,” COAI stated, urging for a clearer and more precise framework.
To further support infrastructure development, COAI proposed that Large Traffic Generators (LTGs), such as Over-The-Top (OTT) platforms, contribute to the USO Fund or a “Digital Bharat Nidhi Fund”. This would ensure that entities profiting from telecom networks participate in their development.
Extended Timeline for Business Losses
In light of the telecom sector’s prolonged recovery journey, COAI has recommended extending the carry-forward period for business losses from eight years to sixteen years under Section 72 of the Income Tax Act, 1961.
Given the additional financial burden from the 2019 Supreme Court ruling on AGR dues and the continuous capital investments required for 5G deployment, this extension would provide much-needed relief. To prevent misuse, COAI proposed a restriction on dividend distribution within five years of utilising such losses, with additional tax implications for non-compliance.
Clarification on Service Tax
COAI highlighted the financial burden resulting from service tax liabilities on AGR payments following the Supreme Court’s judgment.
“Levying service tax on incremental AGR would impose an unjust cost on the sector,” COAI stated, requesting exemptions under Section 11C of the Service Tax Act. Additionally, the association seeks exemptions on service tax related to AGR dues for April 2016 to June 2017 and expedited cash refunds for reverse charge mechanism payments.
Customs Duty Exemptions for Telecom Equipment
With customs duties on telecom equipment raised to 20 per cent in recent years, COAI has sought exemptions for 4G and 5G network products to reduce costs associated with rolling out advanced telecom infrastructure.
“Until high-quality, domestically manufactured telecom equipment becomes available at competitive prices, reducing customs duties to zero will alleviate cost pressures,” the association recommended, suggesting a gradual increase in duties as the domestic ecosystem matures.
- Speedier Resolution of Tax Disputes
COAI has called for statutory timelines for disposing of appeals by the Commissioner of Income Tax (Appeals). The association highlighted delays in resolving tax disputes, which have adversely impacted cash flows and financial planning for telecom operators. Streamlining the data reconciliation process in Form 26AS has also been suggested to simplify income reconciliation.
Lt. Gen. Dr S P Kochhar, Director General of COAI, highlighted the pivotal role of the telecom sector in achieving India’s digital aspirations. He stated, “Over the last decade, the Indian Government has implemented a number of reforms to boost the country’s digital objectives and enhance the growth of the sector. As acknowledged by the Government, the telecom industry is playing an important role in this enhancement and expansion by delivering affordable access and inclusion across the verticals in a horizontal manner.”
Dr Kochhar further emphasised the need for prioritising infrastructure development, adding, “Lowering levy burdens and promoting investment opportunities for the TSPs are not just economic imperatives, but also strategic investments in the country’s future. With 5G and the future 6G projected to accelerate India’s digital economy and bring transformation across industries, we encourage the Government to prioritise telecom infrastructure development.”
As the Union Budget 2025-26 approaches, the telecom sector remains hopeful that the Ministry of Finance will consider COAI’s proposals. Addressing these challenges will not only strengthen the financial health of telecom operators but also enhance the ease of doing business in India.
With transformative technologies like 5G and 6G on the horizon, the government’s support will be instrumental in propelling India towards becoming a global digital leader.
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