Supreme court ruling allows telcos to claim duty credit

The Supreme Court (SC) has made a favourable for Indian telecom companies. According to an order from the Supreme Court, telecom service providers are eligible to claim credit for duties paid on parts such as green shelters and tower components.This comes as good news for the telecom companies because the Bombay High Court recently ruled that these goods are not capital goods and therefore businesses cannot claim cenvat credit for the duties they have paid. 

This judgement is expected to help Indian telecom providers including Vodafone Idea (Vi), Bharti Airtel, and Reliance Jio. This will also help other businesses like Tata Teleservices, Reliance Communications, and Indus Towers. It will relieve the telecoms of the financial burden associated with infrastructure-related charges.

Lt. Gen. Dr. S.P. Kochhar, Director General, COAI commented on the development saying, “We welcome the Hon’ble Supreme Court’s judgement affirming the telecom industry’s entitlement to claim the credit for taxes and duties paid on towers and its parts - including green shelters. The Apex Court's judgement will not only help the industry in fulfilling the compliances, but will also help reduce the financial burden on the sector. By confirming to the view of the Hon’ble Delhi High Court, this verdict reinforces fairness and consistency in taxation. We await the detailed judgement for further clarity on  its implementation.”

The Supreme Court's ruling is also anticipated to improve the infrastructure providers' spirits. This will facilitate the faster expansion of the nation's connectivity and telecommunications infrastructure. This Supreme Court ruling will be warmly received by telecom operators, and it will be interesting to observe how much of an impact it has on their margins in the upcoming quarters.

Digital Infrastructure Providers Association also welcomed supreme court's ruling on Input Tax Credit for Telecom Towers. Manoj Kumar Singh, Director General, Digital Infrastructure Providers Association (DIPA) stated, "The Supreme Court's landmark judgment allowing telecom companies to claim input tax credit on tower components and shelters marks a watershed moment for India's digital infrastructure sector. This ruling also provides crucial financial relief to infrastructure providers who form the backbone of India's digital revolution.

This decision reflects DIPA’s continuous representations in acknowledging telecom towers as essential plant and machinery, acknowledging their critical role in enabling digital connectivity. The judgment will significantly improve the financial health of infrastructure providers, enabling them to accelerate the deployment of digital infrastructure across India. This comes at a crucial time when our nation is rapidly advancing toward 5G expansion, digital transformation and the accelerated commercialization of the 6G stack.

The ruling will have far-reaching implications for the sector's growth trajectory, delivering multiple transformative benefits to India's digital infrastructure landscape. The judgment will release substantial working capital that can be strategically reinvested in infrastructure development, while simultaneously reducing the overall cost of service delivery across the sector. This financial flexibility will enable faster deployment of digital infrastructure in underserved areas, addressing critical connectivity gaps in rural and remote regions. Furthermore, the ruling strongly aligns with and supports the government's Digital India initiatives and ambitious 5G rollout plans, providing the necessary financial framework to accelerate India's digital transformation journey.

The ruling is expected to significantly benefit key players in the sector by allowing them to claim tax credits previously considered ineligible. DIPA has consistently advocated for this reform through constructive dialogue with various government stakeholders. The infrastructure provider industry has established a robust telecom infrastructure with more than 8.1 lakh towers nationwide, demonstrating our commitment to India's digital future. This landmark decision will further strengthen our industry's capability to meet the escalating demands of digital connectivity while catalyzing fresh investments in the sector, fostering innovation, and advancing the government's vision of a digitally empowered India. We commend the Supreme Court for this forward-looking decision that strengthens the foundation of Digital India.

Telecom operators were unable to influence the Supreme Court in any way with their curative petition to recalculate the adjusted gross revenue (AGR) dues.The telecoms will feel some relief from this judgement, even though it won't have a significant effect. Additionally, the telcos recently increased the rates for their mobile plans for consumers all over India. Higher income levels and a stronger average revenue per user (ARPU) figure have also helped them enhance their financial status.