REDUNDANT EXEMPTIONS

Vide Notification No.25/2012-ST, dated 20.06.2012 the Central Government has given mega exemption list of taxable services which are exempted from the whole of the service tax leviable with effect from 01.07.2012. Serial No. 32 of the said Notifications provides that the services by way of making telephone calls from-

(a)    Departmentally run public telephone;

(b)   Guaranteed public telephone operating only for local calls; or

(c)    Free telephone at airport and hospital where no bills are being issued

are exempted from the whole of service tax leviable

Service tax concept was introduced during the year 1994 during which three services were introduced in the service tax net. Vide Notification No. 3/1994-ST, dated 30.06.1994 the following taxable services in respect of telephones were given exemption from the whole of service tax leviable under Section 66 of the Act:

12. Departmentally run public telephone for local calls;

13. Guaranteed public telephone operating only for local calls;

14. Free telephone at Airport and Hospitals where no bills are being issued.

The said Notification was rescinded by the Notification No. 34/2012-/ST, dated 20.06.2012 and the above said three services have been inserted in the mega exemption list.

Out of the three exemptions meant for telephones the first two become redundant now. The Department of Telecom has been converted into M/s Bharat Sanchar Nigam Limited, a Public Section Undertaking with effect from 01.10.2000 which is having jurisdiction all over India except the twin cities viz., New Delhi and Mumbai.   Mahanagar Telephone Nigam Limited, a Public Sector Undertaking was formed during the year 1986 which is having jurisdiction over the twin cities New Delhi and Mumbai. 

When the Department of Telecommunications was rendering the telephone service the Department had run public call officers for making local calls as well as STD/ISD calls in telegraph offices, post offices and in the customer service centres for the easy access of the public to utilizes the services of telephone. Service tax exemption was given to the departmentally run public telephone for local calls but not for the public telephones used for making STD/ISD calls. Now the Department of Telecommunications is not rendering the service of telecommunications but it has taken the role of licensor giving licenses to the service providers for various services rendered.  As such now there is no departmentally run public telephone for local calls. Therefore this exemption became redundant and to be deleted from the mega list. taxtmi.com

Next is the guaranteed public telephone operating only for local calls, is taken for analysis to the present situation. The public call office concept brought a revolution in the telecom sector. Local Public call offices as well as STD/ISD public call offices have been operated by the franchises for easy access of the public. These two types of public call offices have been provided to the franchisees on guarantee basis. The franchisee is to give guarantee for the minimum amount payable to the Department. If the revenue exceeds the minimum guaranteed amount the franchisee is eligible for the commission as per the agreement made by the franchisee with the Department. If the revenue is less than the guaranteed amount, the franchisee has to pay the balance amount to meet out the requirement of guarantee. Exemption is given to the public call office meant for making local calls only from the whole of the service tax leviable. On introduction of ‘95’ facility which enabled the subscribers to make the intra circle calls the said facility was also extended to the public call offices meant for making local calls only. From the time of the introduction of ‘95’ facility in the guaranteed public call offices for local calls service tax was levied and remitted to the Government. Now the number of public call offices is declining due to the increase of mobile phones. Even coin boxes are having intra circle dialling facility. To the best of my knowledge there is no guaranteed public telephone for making local calls only. Thus this category of exemption is also redundant which should be removed from the mega exemption list.

Village Panchayat Telephones (VPT) are provided in villages for easy access to the rural people to avail telecommunications service at concessional rate.  These telephones are provided in two types one is for making local calls only and the other is for making all types of calls i.e., STD/ISD. Vide Circular No.146/15/2011-ST, dated 20.09.2011 the Department clarified that BSNL is entitled to exemption for VPTs for local calls under the heading ’guaranteed public call offices for making local calls’. The concept of VPT is different from guaranteed public call offices since VPT is not guaranteed public telephone. Thus exemption to VPTs may be given under ‘Village Panchayat Telephones for making local calls’. The said exemption may be extended to other basic service providers who provide such VPT service for making local calls.