3G fee to get capital assets status

Sucessful bidders for 3G spectrum will be allowed to treat their bid amount as expenses over 20 years, the tenure of 3G licence. This will enabl

e telecom companies to reduce their tax outgo.

A top finance ministry official, who did not want to be named, said that his ministry had decided to clear the proposal mooted by the Department of Telecom (DoT) to ‘allow the amount paid for spectrum to be treated as capital asset, which would be amortisable for tax computation purposes’ .

This means, if a telecom company were to bag pan-India 3G spectrum by paying upwards of Rs 3,500 crore (the minimum bid amount), the operator will be allowed to set off this amount in 20 equal annual installments.

The move is expected to be an added incentive for telcos to bid aggressively for 3G spectrum during the auctions as operators can now reduce the taxes they pay annually to the government. The finance ministry official added this incentive would also be applicable to companies bidding for Broadband Wireless Access (BWA) spectrum. BWA involves technologies, such as WiMAX, that allow telcos to offer wireless internet services.

3G spectrums will enable telcos to offer high-end services on the mobile, such as ultra-fast downloads, videoconferencing and interactive gaming. BWA platforms, such as Worldwide Interoperability for Microwave Access, offer data speeds that are 10-30 times faster than 3G.

When contacted, a top DoT official said the finance ministry had indicated that it was favorable towards treating the winning bid amount as ‘capital expenditure’. “We are yet to get an official communication from the finance ministry on clearance for the proposal,” the DoT official added.