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Telecom boom rings billions in India

"Telephone is the single largest source for the service tax kitty," says the study by the Associated Chambers of Commerce and Industry, entitled "Assocham Eco Pulse". A phenomenal annual increase in the number of telephone users, particularly in the cellular segment, will ring in a whopping Rs126.50 billion ($2.85 billion) in the government cash register by 2007-08," says the study.

The present contribution of the sector is Rs 44.70 billion ($1 billion), which is already the single largest source for service tax, the study added.

The study has based its findings on the premise that the telecom base will expand three-fold from 98.4 million in 2004-05 to 278 million by 2007-08. "The study found that while the number of telephone subscribers being added per month is three million, the figure would go up to five million per month with the total subscriber base growing by three times in the next three years."

Telephone has remained a pre-dominant contributor to the service tax kitty ever since the levy was introduced in 1994. In 1998-99, it contributed as much as 54 per cent to the total service tax revenue.

With number of services being brought under the tax next expanding, the revenue share of telephone sector may have declined, but it is still a major contributor to the exchequer. The importance of telephone as a revenue generator can be gauged from the fact that while over 70 services grossed Rs141.34 billion ($3.2 billion) in 2004-05, the telephone sector alone contributed over Rs 44.70 billion. The budget estimates for the current fiscal puts share of telephone sector at Rs 51.86 billion as against total estimated service tax collection of Rs175 billion. In what could be termed as a mobile revolution, the subscriber base for this segment touched 52.22 million last fiscal, registering an impressive growth of 55 per cent over the previous year. In July, the base further scaled up to 59.83 million, a growth of 2.5 million customers per month. With the current pace of growth in the telephone industry, it is likely that the revenue target set by the government would be exceeded to touch Rs 71.95 billion ($1.6 billion) by the end of the current fiscal.