CENVAT Credit to Ease Burden on TSPs: Telecom Group

The Delhi High Court allowed Central Value Added Tax or CENVAT credit on telecommunication towers and parts that include pre-fabricated shelters

Tower and Infrastructure Providers Association (TAIPA), said on Tuesday that the inputs tax credit permitted by the Delhi High Court for telecom infrastructure companies would ease additional financial burden on telecom service providers (TSPs).

TAIPA represents leading mobile tower companies including Bharti Infratel, Indus Towers, American Tower Corporation, GTL Infrastructure and Reliance Infrastructure.

The Delhi High Court, last week, allowed Central Value Added Tax or CENVAT credit on telecommunication towers and parts that include pre-fabricated shelters. There was a dispute over providing input tax credit on certain telecom parts between the tax authorities. The authorities were arguing that due to the immovable’ nature of certain equipment, the tower companies did not qualify to get input tax credit.

CENVAT to reduce overall billing

Tilak Raj Dua, Director General, TAIPA, said, “The availability of CENVAT credit (input tax credit) mechanism will reduce total billing by IP-1s to telecom service providers.”

TAIPA honours the verdict of Delhi High Court for permitting input tax credit on telecom towers and related pre-fabricated shelters and parts, which was available under the regime of Goods and Service Tax (GST), Dua said.

According to the Delhi-based group, telecom infrastructure companies have a direct contribution of over Rs 5,000 crores every year in the form of service tax and corporate income tax. The industry invests over Rs 10,000 crores per annum in procurement of telecom equipment such as towers, batteries, shelters, DG sets, air-conditioners and power management systems.

Under the present rules, service companies can claim tax credit on their capital expenditure and use them to balance their liability of GST. Earlier, there was no such provision for services. Telecom operators had sought input tax credit for capital expenditure on the installation of towers, switching equipment and cell sites.