Industry hails DoT's proposed service tax cut on Internet

NEW DELHI, INDIA: The Internet services in India, amidst encouraging projections, are yet to develop. However, the department of telecommunications (DoT) has come out with a new proposal. Now, the department bats for 12 per cent service tax cut on the Internet. Although the proposal has got a warm reception from the industry, will it cut the ice? Perhaps, only time could unfold the Internet saga.

The move, if approved by the Ministry of Finance, is likely to pass on benefits to the Internet consumers while India's 150 odd Internet service providers gleam in anticipation for an obvious cause. McKinsey & Company believes that by 2015, India is poised to have 28 per cent Internet subscribers.

Speaking to CIOL, president of the Internet Service Providers Association of India (ISPAI) Rajesh Chharia said that it's a good move that could immensely help in proliferation of broadband in the country. "With a waiver on service tax, the Internet users will eventually get benefit of service charge," Charria added.

Cellular Operators Association of India (COAI) too welcomes the DoT proposal and believes that service tax rebate is in the best interest of the subscribers and facilitates the provision of affordable and quality-driven services, applications and devices to the consumers. The association also feels that it would boost the industry.

In the realm, COAI also believes that the government must also ensure that such reductions and incentives are provided on a non-discriminatory basis. "It should ensure level playing field to all concerned companies while ensuring the legitimate policy directions of the government, consistent with its treaty and other legal obligations," said COAI DG Rajan S Mathews.

Research firm Business&Market feels that any doing away of service tax on Internet usage should actually be seen as a move to align with the new telecom policy objectives. ''This would certainly be a positive for the telecom and ISP sector, and also further promote local manufacturing of handsets," said Business&Market founder-analyst Deepak Kumar.

Business&Market feels that though the Web 2.0 penetration is in its nascent stage in India, it shouldn't be deemed insignificant. It expects that the country's social media users' base, at the dusk of 2012, would be of more than 60 million and thereby adding up to 10 million consumers over the next one-year timeframe, taking Internet to the center stage.