Budget 2019: Tax Benefits, strong infrastructure expected for IT, Telecom industries

The Tower and Infrastructure Providers Association (TAIPA), an industry body, has urged the Ministry of Finance to allow an accelerated depreciation rate of 65 per cent on batteries, 20 per cent funding through external commercial borrowings (ECB) for the working capital, and inclusion of telecom towers in priority sector lending. The industry uses lithium ion batteries, which have an average life span of 3-5 years. A higher depreciation rate for these batteries can help higher adoption of these batteries, which can decrease dependence on diesel for power back-up, according to the telecom tower industry body. Diesel adds to the higher cost of production for the tower companies.

Accelerated depreciation is a method whereby an asset loses book value at a faster rate than the traditional straight-line method. Generally, this method allows greater deductions in the earlier years of an asset and is used to minimise taxable income.

As tower industry is an inseparable part of telecom services, the specific inclusion will bring parity for the tower companies with telecom operators and other key industrial sectors. The benefit of Section 72A was introduced to telecom operators in financial year 2002-03 with a view to encouraging rapid consolidation and growth in the sector.

Before that, each telecom operator used to set up its own towers to cater to its own need for passive infrastructure (telecom towers, shelters, power back up) services. Accordingly, the concept of TISPs was not envisaged in financial year 2002-03, when the benefit of Section 72A was extended to the telecom sector.

Section 72A allows accumulated losses of amalgamating company to be carried forward and set-off in the hands of the amalgamated company.

According to TAIPA, the tower industry is expecting to install around 25,000 towers in the coming financial year with around Rs. 1.25 lakh taxes paid on each. The current situation could result in increase in cost of providing the telecom service.

The industry body rues that under the Central Goods and Services Act, 2017 (CGST Act), telecommunication towers have been specifically excluded from the definition of "plant and machinery" provided in the explanation to Section 17.

Digital India, smart cities, providing e-governance services to the common man and other flagship programmes of the government depend entirely on the availability of critical telecom infrastructure and any tax/ levy on such nation building installations will ultimately increase the cost of the services to the end-consumer.

The relief from angel tax is now available to all eligible start-ups retrospectively, and some 342 start-ups have got an exemption since February.

The government is likely to maintain a status quo on angel tax for start-ups in the Union Budget to be presented on July 5, according to sources. The issues were taken care of in February this year, they added. It indicates no change in Section 68 of the Income Tax Act, 1961, under which any unexplained funding raised by a start-up can be held as income and taxable. Many start-ups, including those from the software industry, are seeking exemption from Section 68 of the Income Tax Act.

If a privately held company issues its shares at a price more than its fair market value, the amount received in excess of the fair market value is taxable as income from other sources under Section 56 (2) (vii)(b) of the I-T Act.

To encourage budding entrepreneurs, the government in February relaxed the definition of start-ups and made companies with sales up to Rs. 100 crore (earlier the exemption limit was Rs. 25 crore) eligible for the angel tax relief.

The relief from angel tax is now available to all eligible start-ups retrospectively, and some 342 start-ups have got an exemption since February.

However, at a pre-budget meeting with the Finance Ministry recently, start-ups from the software and internet sector said though the government considered Section 56 (2) of the Income Tax Act in February, notices had been served to them under the section.

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