Assocham seeks restoration of service export sops for telecoms.

NEW DELHI: Industry body Assocham has approached the Commerce Ministry for restoration of fiscal incentives for telecom firms under the 'Served from India' scheme, contending withdrawal of benefits was a result of erroneous understanding of the sector.

Under the scheme, service providers were entitled to duty-free scrips, equivalent of 10 per cent of their foreign exchange earnings. These scrips could be adjusted for payment of duty on import of capital goods.

However, the incentives given under the "Served from India' (SFI) were withdrawn by the Directorate General of the Foreign Trade (DGFT) in the Commerce Ministry from August 2009.

The withdrawal of benefits, according to the chamber's letter to DGFT, was based on a "misconception" that when telecom services are performed within India and paid for in foreign exchange, they do not amount to export of services because the call originates or terminates within the country.

It said that in case of Indian subscribers receiving international calls, the service provider is providing a service to overseas callers in terms of allowing them access.

"The recipient of the service is, therefore, a person outside India and, therefore, such services should qualify as exports".

Assocham Secretary General D S Rawat said rentals from optic fiber in India and outside the country have been held to be ineligible for SFI on the ground that the services are not provided to a foreigner in a country outside India or are rendered from a location outside the country.

"All these conclusions ignore the definition of 'services' read with that of 'service provider'" he said.

The chamber said what is worse is that the withdrawal of the fiscal incentive was from retrospective in nature and was "inconsistent with all principles of natural justice and fair play".

Rawat said that SFI scheme was a key incentive, which should be restored to the telecom sector , especially in view of the rollout of 3G services like high resolution video, high speed broadband including data transmission.

Source : economictimes.indiatimes.com