[blackwasp]

Just pay up: The Supreme Court on Wednesday said it won’t allow the recalculation of the adjusted gross revenue (AGR) dues of telecom firms. It also questioned the Centre on the allowing of self-assessments without permission of the court, calling it a contempt of court. "Are we fools?... Do the DoT officers think they are superior to us? Are these companies untouchable? Everyone has been trying to influence us...," said the court. The court said it was a matter of public money that has gone unpaid for 20 years and that the telcos were trying to influence public opinion through the media.

Not again: For 14 years telecom companies were locked in a legal battle with the Centre over the definition of 'adjusted gross revenue' on which the spectrum charges and licence fees they pay to the government depend. On October 24 last year, the SC ruled in favour of the government by approving its definition of AGR. That left telecom companies facing over Rs 1.47 lakh crore in past dues. The companies sought a modification of the court order claiming a financial crunch and also approached the government. While the government held back the recovery of dues and later allowed the telecom companies to recalculate their dues, the apex court has shot down both the proposals. It has, however, agreed to hear the government's plea to allow these companies to pay the dues over 20 years due to the likely "adverse impact" on the economy, jobs and millions of consumers from the collapse of these firms. The companies have, meanwhile, paid up a part of the dues.

What's the matter? Telecom companies pay 3-5% of the AGR as spectrum usage charge and 8% of AGR as licence fees. That means higher the AGR, higher the payment to the government. The operators said that AGR should comprise revenue earned only from telecom services, while the government said that AGR should include all revenue, including those from non-core operations. A telecom company also earns a sizeable revenue from things like renting or selling fixed assets, selling scrap, from corporate deposits, real estate transactions, by selling handsets or by way of dividend or interest on its investments. If all this is included as revenue for calculating AGR, their outgo increases substantially.

Not another shock: The stock market went into a free fall again on Wednesday as investors, already spooked by rising coronavirus cases reacted to the tough stance of the SC on AGR dues. Banking shares were the most hit as they have huge exposure to telecom firms. BSE Sensex tanked 1,710 points to end below the 29,000 mark (at 28,869) for the first time since January 2017 while NSE Nifty breached the 8,500 level to end at 8,469 points.

Source

[AMG Power]

This 14 year old matter has been raked up by a new entrant.

The strategy is that the new entrant has relatively less AGR dues and knows that the the competition has much larger dues which cannot be paid easily.

It's a no brainer way to kill the competition - use political clout to speed up the judgement and ask companies to pay 58000 crores in a few hours or face Govt action and closure.

@OP: please add the AGR dues of Jio in your image.

[turbo]

Telecom companies here are like the school kids that keep postponing their summer vacation homework, until the day before the school re-opens, and then realize that they cant finish homework for one and a half month in one night.

They didnt pay taxes for years, and now complain its too much.

[srini1785]

Originally Posted by AMG Power

This 14 year old matter has been raked up by a new entrant.

The strategy is that the new entrant has relatively less AGR dues and knows that the the competition has much larger dues which cannot be paid easily.

It's a no brainer way to kill the competition - use political clout to speed up the judgement and ask companies to pay 58000 crores in a few hours or face Govt action and closure.

Quite agree. To add to that, all others brought it on to themselves by dragging it too long. Its a universal rule that you pay taxes on the sum of all revenues. The argument of the telcos is like some one saying that i would pay taxes on the salaries head only and not on other avenues( eg rent revenue from rented out property, sale of fixed assets, lottery etc). Smart move by Jio.

[sachinayak]

Originally Posted by srini1785

Its a universal rule that you pay taxes on the sum of all revenues. The argument of the telcos is like some one saying that i would pay taxes on the salaries head only and not on other avenues.

It is not as simple as it seems at first glance.

Take the case of ONGC, which has been almost a case of caught in the cross fire. It has to pay tax not only on its telecom-derived revenue, but on its entire revenue (including non telecom-derived), which I think is rather stupid. Yes, the policy wordings should have been very carefully scrutinized, but you need to be reasonable.

[srini1785]

Originally Posted by sachinayak

It is not as simple as it seems at first glance.

Take the case of ONGC, which has been almost a case of caught in the cross fire. It has to pay tax not only on its telecom-derived revenue, but on its entire revenue (including non telecom-derived), which I think is rather stupid. Yes, the policy wordings should have been very carefully scrutinized, but you need to be reasonable.

As long as you are legal entity with a single PAN number, the rule says you pay taxes on the gross revenue only. Tax experts here can clarify. This is my understanding of the whole taxation subject.

[AMG Power]

Originally Posted by srini1785

It's a universal rule that you pay taxes on the sum of all revenues.

You Income tax on Rent, sale of scrap, sale of fixed assets / furniture etc. You do not pay Spectrum tax on those items.

Here the government is asking to pay Spectrum tax on these items in addition to Income tax. The companies have already paid Income tax on these items - they don't need to pay Spectrum tax on unrelated items like sale of scrap, rent etc.

As for the move by Jio, it's anything but smart. It's crony capitalism - the second oldest profession in the world.

[pganapathy]

I have no issue with the Supreme Court asking the telecom companies to pay immediately. If they are unable to do so, it is their fault entirely. They should have put money aside for this. My problem is with the AGR calculation. I think the government definition is incorrect.

[WorkingGuru]

The Supreme Court has also lambasted the media for not reporting the issue clearly, so its fairly important to realise that an open ended question to the general public on a topic they would know little about, may not yield their most informed opinions.

Anyway, a IMO sovereign state must remain democratic only to the extent it can do so within reasonable viability, but to maintain that status, the govt must ensure pragmatism isn't ignored.

Society, especially with deeply cultural background, is always hard-pressed to compete within itself, often in borderline non-legal ways. Not always as extreme as "Gangs of Wasseypur" ways, but through lobbies/preferences for all kinds of social bias/'preference'.

World-over, the way in which the establishment functions is that the hierarchy of power works such that the telecom spectrum licenses are distributed to people who are close to the bureaucracy and owed favours to.

To an extent, this method of distribution helps the govt ensure that resources are concentrated in the hands of people who won't use their money to create extreme strife in a society that is always hard-pressed to "compete" within itself, often in borderline non-legal ways. Managing this is very hard and that is why the world lauds India for being able to keep such a heterogeneous society, largely, united in a country that has fair number of exploitable & valuable natural resources and fairly disciplined, diligent & non-temperamental human resource too.

OK, so why do we think the govt has laid this policy of taxing telecom revenues and not the profits as they normally do? Because telecom companies could get tempted to make creative accounting standards to simply show losses or meager profits & transfer significantly large amounts of money to tax heavens. Forensic audit is not possible when all companies resort to such tactics. So, in the interest of revenue, this clear policy framework for taxation was made. If the country were to receive this amount that was clearly due, it could've helped contain fiscal deficit to a large extent.

While we may discuss the matter on hand ie. the dispute between the telecom companies & DoT, I would go to the extent of urging fair caution against commenting on Court decisions & Parliamentary affairs, there was a recent advisory by another forum too regarding the same.

[srini1785]

Originally Posted by AMG Power

You Income tax on Rent, sale of scrap, sale of fixed assets / furniture etc. You do not pay Spectrum tax on those items.

https://www.thehindubusinessline.com...le30008124.ece


The above article ( and many more) would give you a general idea of what the dispute is about. No one is charging spectrum tax on scrap. The main problem seems to be on the basic definition of AGR. The contention of the DOT is that whether its individual or a company, you pay your taxes on your total gross revenue , taking into account all revenue earned minus the allowable deductions ( yes there is provision for it too ) and calculate the final revenue and pay your taxes. Its the same for all, companies and individuals.

Telcos don't want to pay taxes on interest, dividends , sale of assets etc. Why?. Ask any tax consultant and he would tell you that you need to pay taxes on all revenues. The FD in the bank which earns an interest is taxed at source unless you provide a form 15H (not sure on the number) declaring that you would show the income and pay taxes later. Sale of plot of land is taxable unless you reinvest the proceeds. During successive regimes ,the DOT has maintained the same stand and are quite right.

Originally Posted by AMG Power

As for the move by Jio, it's anything but smart. It's crony capitalism - the second oldest profession in the world.

Well , i don't know. Do you think that the other companies have any less clout with the govt than the new entrant?. Why would the govt argue in their favor and test the patience of the court?.

I say it again, the telcos had it coming. They could have agreed to the revenue sharing model proposed in '99 itself and got out of the mess. They persisted. What fault is it of the new entrant?. Its a bare knuckle fight out there and if you go to a fight with fresh wounds , your opponents are surly going to rip it open. Sorry, that's the way it is and there's no sugar coating it.

[DigitalOne]

Originally Posted by AMG Power

This 14 year old matter has been raked up by a new entrant.

The strategy is that the new entrant has relatively less AGR dues and knows that the the competition has much larger dues which cannot be paid easily.

It's a no brainer way to kill the competition - use political clout to speed up the judgement and ask companies to pay 58000 crores in a few hours or face Govt action and closure.

@OP: please add the AGR dues of Jio in your image.

Originally Posted by AMG Power

As for the move by Jio, it's anything but smart. It's crony capitalism - the second oldest profession in the world.

With all due respect, above posts are totally ignorant.

DoT has been trying to bat on behalf on the affected telecom companies to mitigate or delay the recoveries but DoT officers have got contempt of court notices filed against them by the SC.

Another aspect is that this judgement by the SC is given by a 3 judges bench. You may disagree with the judgement and freely express it, but I would be very very careful to attribute a 3 judge bench judgement to crony capitalism or favoritism.

[alpha1]

From my "limited" experience dealing with the Govt entities and PSUs, it is always the burden on the supplier/vendor/bidder to clarify all the techno-commercial details and then submit bid competitively leading to "Purchase Order" or "MoU".

The telecom sector was liberalised under the National Telecom Policy, 1994 after which licenses were issued to companies in return for a fixed license fee. To provide relief from the steep fixed license fee, the government in 1999 gave an option to the licensees to migrate to the revenue sharing fee model.

The telecom operators themselves raised hue and cry over fixed license fee and therefore Govt decided to change the model.

https://dot.gov.in/sites/default/fil...0Licence_0.pdf
Page 47:
The Gross Revenue shall be inclusive of installation charges, late fees, sale proceeds
of handsets (or any other terminal equipment etc.), revenue on account of interest,
dividend, value added services, supplementary services, access or interconnection
charges, roaming charges, revenue from permissible sharing of infrastructure and any
other miscellaneous revenue, without any set-off for related item of expense, etc.

[Stribog]

Originally Posted by AMG Power

As for the move by Jio, it's anything but smart. It's crony capitalism - the second oldest profession in the world.

The SC here is finding fault with the govts plan to give relief to the non Reliance cos (they already paid up), how exactly is this crony capitalism?

That being said, the govt should draw the line today and now. This is obscene levels of judicial overreach. High time the SC and the judiciary in general was reined in.

[whitewing]

An unfortunate situation where
- The previous Govt tried play Shylock.
- The current Govt. doesn't want to be caught in a position that adds any further credence to the ""suit boot sarkaar tag line.
- The SC thinks it is legitimate to charge GAIL on gross revenue for its fault in contributing to digital India.

The consumer will get jacked in the end.

A royal, mindless mess. Only shows what happens when there is application of Intellect and Greed sans Wisdom.

Common sense.... whats that ?

[GrammarNazi]

IMO the buck stops with the auditor who signed the balance sheets & opined on them.

For 14 years telecom companies were locked in a legal battle with the Centre. WHY did the external auditors not demand that the management create a provision for this contingency by setting aside funds from profits ?

Did the auditors not study the dispute along with the policy framework ? It would've indicated at a few possible outcomes of the legal battle to a fair degree. This would prompt them to ask WHY no provision was made to cover the costs to a small extent over each year in the past 14 years.

Originally Posted by whitewing

...A royal, mindless mess. Only shows what happens when there is application of Intellect and Greed sans Wisdom....

This comment is unfair. Request you study the case, read the judgement and reconsider before putting up such comments.