Trai curtails revenue ambit

The Telecom Regulatory Authority (Trai) on Thursday suggested that revenue from discernible and standalone sale of handset or telecom equipment not bundled with telecom service should be excluded from the adjusted gross revenue for the purpose of calculation.

“Sale of handsets or telecom equipment bundled with the telecom service should be part of AGR. It is not to be included in the AGR if there is discernible and stand-alone sale of handset or telecom equipment,” TRAI said releasing its recommendations on components of AGR.

The authority is of the view that service tax is not a revenue for the service provider, which is only a collecting agency on behalf of the government. The inclusion and exclusion of this item should be on accrual basis.

Similarly, the interconnection usage charge (IUC) is a pass-through revenue and the service provider is only collecting interconnect usage charge on behalf of other service providers, therefore, the inclusion and exclusion of this item should be on accrual basis.

The other advantage of allowing accounting of service tax and IUC on accrual basis is that these would be easily verifiable from the annual accounts of the service providers, it said.

Service tax should be shown on accrual basis, both for inclusion and exclusion from the gross revenue for the purpose of AGR. IUC should also be shown on accrual basis both for inclusion and exclusion from the gross revenue for the purpose of AGR.

Even though the income from dividend is part of the revenue it cannot be said to represent revenue from the licensed activity and therefore should not be included in the AGR. As dividend income is separately stated in the annual accounts of service providers, there would be no difficulty in verifying its correctness, it said.

As DoT has already taken a view that receipts from Universal Service Obligation (USO) will not be part of AGR, the authority recommended that necessary amendments should also be carried out in the licence to make it clear. This fund is mainly utilised for the implementation of the government’s recognised projects and policy inducement.