TELEPHONE COMPANIES

Q.1 Ans. Q.2 Ans. What is the taxable service in respect of telecom services? Taxable service in respect of telecom sector is the service provided to a subscriber by the telegraph authority in relation to a telephone connection. What is the value of taxable service in case of telephone services? In case of Telephone Services, the value of taxable service is the gross total amount (including adjustment from any deposits, surcharge, etc.) charged by the telegraph authority to the subscriber in the bills. Authority :- Board Circular No.29/3/99 dated 15.07.99, F.No.149/5/97CX.4. Is there any exemption for any sector in Service Tax on telephone services? Yes, the telephone services provided to the following are exempted from payment of Service Tax

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Q.4

U.N. or an International Organisation. Specified diplomatic mission or its Members. Departmentally run public telephones for local calls. Guaranteed public telephone only for local calls. Free telephones at Airports and Hospitals where no bills are being issued.

{Authority:- Notfn.3/94-ST dt. 30.6.94, 5/96 dated 3/4/96 and 13/97 dated 14/02/97} In cases of plastic roaming facility introduced by Cellular Phone Companies, who would be liable to pay the service tax the operator (home operators) with whom the customer have subscribed or the operator (service operator) where the customer is visiting? In the case of plastic roaming facility, the liability to pay Service Tax is on the home operator (home network), to whom the subscriber is attached, as he is the one, who arranges roaming facility in other metro cities through arrangements with the service operators (visiting network). Is the rent and access charge for providing junctions for mobile operation to cellular telephone operators by DOT will be subject to Service Tax. No, the Service Tax is not chargeable on rent and access charges paid to DOT by cellular phone operators. Is the cost of Sim Card excludible from activation charges to be collected from subscribers for the purposes of levy of Service Tax? No, The amount received by the cellular telephone Company from subscribers towards Sim Card would form part of the taxable value for levy of Service Tax. As the sim Card unlike the telephone instrument cannot be purchased by the customer from elsewhere, the charges towards the Sim Card are viewed as processing charges for activating the cellular phone. Whether a prepaid SIM card is chargeable to Service Tax ? Yes. All the prepaid SIM cards are chargeable to Service Tax. Whether the free telephone provided by a telephone company to their employees and friendly users from whom they do not recover any charges are liable for payment of Service Tax. No, when the service is provided free, there is no liability under Service Tax Whether the cellular company can allow discount on their air-time charges and in such cases are they eligible to pay tax only on reduced amount? Yes. In cases where the telegraph authority has extended services at a discounted price, the Service Tax liability is limited to the discounted price so charged.

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Q.5 Ans. Q.6 Ans.

Q.7 Ans. Q.8

Ans. Q.9 Ans.

Q.10 Is Service Tax leviable on the interest accrued on refundable deposits?

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No, interest earned on refundable deposits has got no nexus with the value of taxable service. Therefore, the Service Tax is not leviable on interest earned on refundable deposits.

Q.11 In respect of Secondary Switching Areas, what would be relevant date for the purpose of calculation of interest in the event of late payment of tax ? Ans. The first date on which the Secondary Switching Areas makes the book transfer to the DOT would be taken as the date of crediting to the Central Govt. for the purpose of assessment and calculation of interest.

Q.12 Q. Whether the value of taxable service provided by Telephone department and those provided by pager companies would include the surcharge collected on delayed payment for charging service tax.? Ans. The value of taxable service in relation to Telephone and Pagers is the gross total amount charged from the subscribers by the Telephone authority. Since the surcharge is also an amount charged from the subscribers. Whenever the subscriber fails to pay the bill within the prescribed period; the service tax shall also be chargeable on the surcharge amount. ( Authority : Board circular No.29/03/99 dt.15.07.99 ) Q.13 Are the Public Mobile Radio Trunking (PMRT) services covered under the service tax net? Ans. In common parlance 'Telephone' is understood to mean as transmission of speech to a desired person beyond the limits of ordinary audibility. Further a 'telephone connection' would mean connecting two telephone apparatus so as to enable a caller to avail the speech transmission facility to the desired person . PMRT also enables a subscribers to transmit speech over long distance to a desired person. Further PMRTS providers have been granted licence to operate their services under the first proviso to subsection (1) of Section 4 of the Indian Telegraph Act 1885. Therefore, PMRTS providers can be treated as telegraph authority within the meaning assigned to it under Section 65 (49) of the Finance Act 1994 and the services provided by them as the taxable services in respect of Telephone connections. Authority: DG(ST)'S letter F.NO. V/DGST/(21) (6) Tele/5/99 dt.20.08.99.