Post-Budget Reaction by Mr. Sandeep Chaufla, Partner, Direct Tax, PwC India
The key tax issue that impacts the sector is that interconnect, roaming charges, ILD, IPLC that a telco pays to international telco is subject to 25% Withholding tax unless reduced by treaty. This Withholding is generally passed on to the payer thus increasing the burden on payer. The Budget proposes to reduce the withholding tax rate to 10% which is in line with rates provided in most of tax treaties, so this will benefit the sector
Other positives for the sector:
(a) Corporate tax rate to be reduced from 30% to 25% over next 4 years
(b) Mere presence of a fund manager not to constitute a PE in India
(c) GAAR deferred by 2 years. To apply to investment made on or after April 1, 2017
(d) The much needed one – FTS / Royalty tax rate reduced from 25% to 10%
(e) More clarity provided on indirect transfer taxability
(g) Domestic TP applicability limit revised to Rs. 20 crores from existing Rs. 5 crores
(h) DTC seems to be scrapped.
(i) Service tax increased to 14% from 12%
(j) SAD reduced on imports
(k) Tax deduction on employing new workforce extended to all sectors with threshold reduced
