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Telcos get a call for service-tax records
September, 17th 2010

The Central Board of Excise and Customs (CBEC) has asked the telecom department for copy of special audits that were undertaken on the books of all leading telecom companies to examine the service tax angle, documents viewed by Media reveal.

Last year, the government ordered special audits on the books of all telcos beginning with Reliance Communications(RCOM) after the Cellular Operators Association of India(COAI), a group of GSM mobile operators, had alleged under reporting of revenues by the Anil Ambani-promoted company. The audits were later extended to RCOMs rivals including Bharti Airtel, Vodafone Essar, Idea Cellular and Tata Teleservices to make sure that they have correctly reported and shared revenues with the government.

Since telcos pay 6-10% of their annual revenue as licence fee, 2-6% as spectrum usage charges and 12% as service tax, reporting lower revenue brings down the component they have to share with the government. The special audit reports of all mobile phone companies have been submitted to the telecom department.

Following this, the communication ministry had also asked all leading telcos to submit their books to the Comptroller and Auditor General of India (CAG), a constitutional body that conducts independent audits of all government accounts.

The Central Board of Excise and Customs will now examine if exchequer has lost on service tax due to alleged under reporting by mobile phone companies.

In August, a four-member telecom department committee was set up to examine the special auditors report. RCOM is learnt to have endorsed the findings that the countrys second-largest telco had under reported its revenues in 2006-07 and 2007-08 causing losses to the exchequer.

But, the telecom department panel, headed by its member finance Vijayalakshmi K Gupta, has also asked the ministry to refer its findings to the legal department before raising any demand on RCOM.

This is because, some of the heads under which RCOM is alleged to have shown lower revenues were sub judice as
cases were pending with the Supreme Court. Besides, some of the issues are also covered under telecom tribunal TDSATs ruling that licence fee is payable only on actual realised revenues and not on notional revenues.

The audit reports other four operators are currently also being examined by the same committee headed by member finance Vijayalakshmi K Gupta.

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