Post-budget analysis - BSETECk

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May 02, 15:46

Post-budget analysis

Telecom

What the Budget does

# Roll out of national rural employment guarantee scheme to all 596 districts in India with a provision of Rs 160 bn.

# Specified inputs and raw materials for manufacture of specified electronics/ IT hardware items have been exempted from excise duty.

# Additional duty of 1% to be levied on imported mobile phones towards national calamity contingency reserve.

# Countervailing duty on wireless data modem cards with exempted by way of excise duty exemption. These goods are already exempt from customs duty. However, 4% additional duty of customs will be attracted.

# Internet telecommunication service brought under the service tax net.

# Customs duty on convergence products to be reduced from 10% to 5%.

# Parent company allowed to set-off the dividend received from its subsidiary company against dividend distributed by the parent company; provided that the dividend received has suffered DDT and the parent company is not a subsidiary of another company.

Impact on sector

# Roll out of national rural employment guarantee scheme to all 596 districts in India to aid faster penetration of mobiles.

# Exemption from excise duty for specified inputs and raw materials for manufacture of specified electronics/ IT hardware to lower the network cost for telecom service providers.

# Additional duty on imported mobile phones to make handsets expensive, thus prohibiting a faster acceptance.

# Imposition of service tax on Internet telecommunication services to make them expensive.

# Reduction in customs duty on convergence products to help establish parity between devices used in the information/communication sector and the entertainment sector.

# Parent company allowed to set-off the dividend received from its subsidiary company against dividend distributed by the parent company; provided that the dividend received has suffered DDT and the parent company is not a subsidiary of another company.

Impact on companies

# Wider rollout of national rural employment guarantee scheme to aid faster penetration of mobiles and consequently faster growth of Bharti Airtel, Reliance Communications and Vodafone in these areas.

# Lower network equipment costs to benefit mobile service players like Bharti Airtel, Vodafone, Idea and Reliance Communications.

# Additional duty on imported mobile phones to restrict volume (subscriber) growth for mobile services companies, though not in a major way.

# Reduction in customs duty on convergence products to help companies like Bharti Airtel and reliance Communications in lowering their costs for DTH expansion.

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