The interconnection service is provided by one telegraph authority to another to enable the telephone subscribers of these telegraph authorities to connect with each other

CBEC has issued a circular no. 91/2/2007-dated 12-3-2007 to clarify that IUC charges are not subject to service tax.

This circular has been issued by providing reference to the new definition of 'telecommunication service' which is to be incorporated vide clause (104) of section 65 of the Finance Act, 1994.

Interconnection service tax treatment clarified: IUC charges are not taxable under the revised telecommunication service definition. Interconnection service between telegraph authorities enabling subscriber connectivity is outside service tax for IUC charges; a CBEC circular clarifies IUC are not taxable, relying on the forthcoming expanded definition of telecommunication service to be incorporated into the statute.