Telecom majors likely to plead for review of SC licence fee ruling

economictimes.indiatimes.com:

Supreme Court's ruling to treat licence fees as a capital expenditure that could potentially prompt authorities to raise hefty retrospective demands, including penalties on operators for tax payment shortfalls of past periods.

Kotak Institutional Equities estimates Bharti Airtel could face a potential tax demand (excluding penalties) of Rs 6,000 crore for 2020-23, while Reliance Jio could be stung by a Rs 8,400-crore tax demand (without penalties) for 2017-2023.

Analysts expect the final tax demands to be higher.
Amortisation benefits
This is after factoring in potential penalties for short payment of taxes for prior periods.

While there could be an initial financial impact, sector experts expect that burden to even out over the licence period, with the tax outgo for telcos likely to decline in later years once amortisation benefits accumulate.

Thus, the overall tax outgo would remain broadly similar over the licence period, compared to the existing calculations, they added. «The company is examining the (Supreme Court) order and its impact, and will decide the next course of action in due course,» Bharti Airtel said in a filing to the BSE on Tuesday.

No potential tax demand estimates for Vodafone Idea (Vi) were immediately available as the telco has been running losses since the merger in August 2018.

«Any retrospective demands pertaining to any past tax payment shortfalls can only be based on a review of the pre-merger financials of erstwhile Vodafone India and Idea Cellular, when they were profitable,» said an analyst at a global brokerage.

Kotak called the apex court order «another adverse judicial outcome,» saying retrospective tax demands on operators could potentially have a large one-off impact. It added