TDSAT rejects DoT's bid to tax ISPs for Internet services

The government’s attempt at charging ISPs a fee of 8 percent of their annual revenue from April 2013 met with failure after the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) rejected it, The Times of India reports. In its verdict, the tribunal stated, “Presumably, the government was required to consider all aspects of the matter, including the question of whether the petitioners, with regard to pure internet services vis-a-vis services rendered by UAS licencees have a level playing field. If they do not, appropriate measure may have to be taken but the petitioners could not be asked to provisionally pay based on their annual gross revenue (AGR), where the final decision is to be taken at a later stage.”

The verdict is the latest in a series of events following a petition filed by the Internet Services Providers Association of India (ISPAI) in July last year. The ISPAI, a body representing the ISPs, had opposed the attempts to tax Internet and broadband services in its petition, and claimed that such a move would “force a change in the licence agreement without mutual consent”.

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No tax on Internet, broadband services (Image Credit: Getty Images)

Elaborating further upon the cause of the ISPAI’s concern, the report added that taxing the Internet and broadband services in the country would invariably burden the consumers, who would then have to shell out the extra buck for using Internet services. The ISPAI sees this as discouraging, since Internet and broadband penetration isn’t high in the country. The pan-India broadband subscribers base is only a little above 14 million.

ISPAI President Rajesh Chharia was quoted as saying, “The TDSAT judgement is a victory for internet and broadband consumer.” Chharia added that the move would help in controlling Internet and broadband tariffs in rural pockets.

To offer the better view in the current scenario, the report shared that at the moment ISPs do not pay any fee to the government. However, “those offering internet telephony pay about 6 percent of their annual revenue as licence fee to the telecom department. The department had recently said it would slap a uniform licence fee of 8 percent of gross revenue on both categories in a two-step process. ISPs would pay 4 percent while ISP-IT companies would pay 7 percent from July 1. Both would eventually have to pay 8 percent of their AGR as licence fee from next April”. 

As per figures released by the Telecom Regulatory Authority of India (TRAI), as part of its ‘Highlights on Telecom Subscription Data as on 31st August 2012’, the broadband subscriber base increased from 14.68 million at the end of July 2012 to 14.82 million at the end of August 2012, registering a monthly growth of 1.37 percent. 

As on August 31 this year, 149 Internet Service Providers (ISPs) were providing broadband services in the country. Out of them, only 115 ISPs provided data to the TRAI for the month of August 2012. For the rest of the ISPs, data from previous month has been retained. Data from the top 10 ISPs, which constitute 93.57 percent of the total subscriber base, have been received for the month of August 2012. The top five ISPs in terms of market share, based on subscriber base are: BSNL (9.47 million), Bharti Airtel (1.37 million), MTNL (1.06 million), You Broadband (0.68 million), and Hathway (0.37 million).