Incentives for the Telecom Sector

Incentives to Promote Telecom Equipments Manufacturing

Ø      Custom duty on ITA-I product reduced to zero w.e.f. 01.03.2005.

Ø      4% additional duty on import of ITA products to countervail the state level taxes.

Ø      No industrial licence for manufacturing of telecom equipment. Simple Industrial Entrepreneur Memorandum (IEM) has to be filed with SIA.

Ø      100% Foreign Direct Investment (FDI) through automatic route.

Ø      Fully repatriable dividend income and capital invested

Ø      Payment of technical know-how fee of upto US$ 2 million and royalty upto 5% on domestic sales and 8% on export sales, net of taxes, through automatic route.

Ø      Imposition of additional import duty, at the rate not exceeding 4% ad-valorem, to countervail sales tax, value added tax, local taxes and other charges leviable on like goods on their sale or purchase or transportation in India

Ø      Promotion of telecom product specific SEZs.

Ø      Modification of Electronic Hardware technology Park (EHTP)/Special Economic Zones (SEZs) scheme to allow 100% sales in the Domestic Tariff Area (DTA) for the purpose of meeting export obligations.

Incentives for Promotion of Service Sectors  

Ø      Any undertaking which has started or starts providing telecommunication services whether basic or cellular, including radio paging domestic satellite service, network of trunking, broadband network and internet services on or after the 1^st day of April, 1995, but on or before the 31^st day of March 2005, will be allowed in computing the total income, a deduction of, an amount equal to hundred percent of profits and gains derived from such business for ten consecutive assessment years.

Ø      Import of specified telecom equipment (ITA1 Products) is permitted at zero customs duty rates.

Ø      Import of all capital goods for manufacturing telecom equipment does not require any license.

Incentives for Exporters

Ø      10 year income tax holiday for EOU/EPZ/STP/EHTP units.

Ø      Export income is exempt from income tax for all exporters.

Ø      Under the Export Promotion Capital Goods Scheme (EPCG) capital goods for pre production and post production (including CKD/SKD thereof as well as computer software systems) at 5% Custom duty is permitted subject to an export obligation equivalent to 8 times of duty saved on capital goods imported to be fulfilled over a period of 8 years. However, for SSI units, import of capital goods at 5% Customs duty shall be allowed subject to a fulfillment of an export obligation equivalent to 6 times the duty saved (on capital goods imported under the Scheme) over a period of 8 years from the date of issue of licence provided the landed CIF value of such imported Capital goods under the Scheme does not exceed Rs. Twenty Five Lakhs and the total investment in plant and machinery after such imports does not exceed the SSI limit.

However, in respect of EPCG licences with a duty saved of Rs.100 crore or more, the same export obligation, as the case may be shall be required to be fulfilled over a period of 12 years.

Ø      Tax holiday 100% for five years and 30% for next five years in a block of 15 years.

Ø      Infrastructure Telecom equipment exempted from customs duty.

Ø      Reduction of customs Duty on Mobile Phones to 5%.

Ø      Exemption from Excise duty on Cellular Phones and it components, Pagers, Radio Trunking Terminals and Parts.

Ø      Telecom services sector allowed the benefit of carry forward of losses on mergers.