The Central Board of Excise and Customs (CBEC) has asked the Department of Telecom (DoT) for a copy of special audits undertaken on the books of all telecom companies to examine the service tax angle.
Last year, the government ordered special audits on the books of all companies, beginning with Reliance Communications (RCOM) after the Cellular Operators’ Association of India (COAI) had alleged under reporting of revenues by the Anil Ambani-promoted company. The audits were later extended to Bharti Airtel, Vodafone Essar, Idea Cellular and Tata Teleservices to make sure that they have correctly reported and shared revenues with the government.
Since telecom companies pay 6-10 per cent of their annual revenue as licence fee, 2-6 per cent as spectrum usage charges and 12 per cent 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 DoT. Following this, the communication ministry had also asked all leading telecom companies to submit their books to the Comptroller and Auditor General of India (CAG), a constitutional body that conducts independent audits of all government accounts. Now it is the CBEC’s turn to 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 auditor’s report which found the second-largest telecom company RCOM to have under reported its revenues in 2006-07 and 2007-08 causing losses to the exchequer. However, 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 are sub judice and the cases were pending with the Supreme Court. Besides, some of the issues are also covered under telecom tribunal TDSAT’s ruling that licence fee is payable only on actual realised revenues and not on notional revenues.
