Jio, Tata gets Income Tax Notice for interconnection usage charges

According to some sources, Reliance Jio Infocomm and Tata Communications have received notices from the Income Tax department regarding interconnection usage charges (IUC). Both companies have appealed against the orders in the past regarding the same matter by the Mumbai division of the I-T department.

The Commissioner of Income Tax (Appeals) is currently hearing the case. According to Tata Communications, the most recent notice is being challenged. The Reliance Jio Company has not commented on this till now.

According to the department, under Section 195 of the IT Act, Indian telecom companies should deduct taxes at source from IUC payments made to foreign telecom operators. Assessee companies must pay the tax deducted at source (TDS) amount and interest if they fail to do so in accordance with Section 201 of the Income Tax Act, 1961.

According to Jio, the 35 to 40 crore 2G customers of Airtel and Vodafone-Idea miss calls to Jio customers because of the price gap. Every day, 25 to 30 crore missed calls are received by the Jio network. Due to this widespread missed call phenomenon, Jio is now making outgoing calls to other operators instead of receiving incoming calls. It was expected that the 25 to 30 billion missed calls per day would generate 65 to 75 billion minutes of incoming traffic to Jio. Instead, the Jio customers' callbacks generate 65 to 75 crore minutes of outgoing traffic.

The above notices came in mid of the 5G introduction phase of Jio and Tata which was announced in October last year. Over 100,000 people attended the India Mobile Congress, a four-day telecom conference and exhibition in Delhi, in October of last year. High-ranking officials, businessmen, and corporate executives came there in massive numbers. Even Narendra Modi, the prime minister also attended the conference. Then came the big bang announcements of the introduction of 5G services.

What is Interconnection Usage Charge or IUC?

When one mobile telecom operator's customers call (like Jio) another operator's customers (like Airtel) on a mobile device, the other operator (Jio in the instant case) must pay for the call. Mobile off-net calls are those between two networks that are not connected to each other.

What is the current IUC charge and who determines the IUC charges?

The Telecom Regulatory Authority of India (TRAI) determines the IUC fees. TRAI issued “The Telecommunication Interconnection Usage Charges (Sixteenth Amendment) the Regulations, 2020” on 17 April 2020. Through these Regulations, the regime of fixed International Termination charges (ITC) @ Rs 0.30 per minute has been revised to a forbearance regime within a prescribed range of Rs 0.35 per minute to Rs 0.65 per minute. Further, to ensure the level playing field between standalone and integrated International Long-Distance Operators (ILDOs), it is mandated that an Access Service Provider shall offer the non-discriminatory rate of ITC to everyone i.e., to its own associated ILDO as well as to standalone ILDOs. These Regulations came into force on 1 May 2020. DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at their own risk. Investors should bear in mind that any investment in the stock market is subject to unpredictable market-related risks. The author has no plans to invest in this offer and also the author does not recommend investing in any offer published on this website.