Internet telephone – who pays Service Tax?

By Vijay Kumar

Want to make a call to the US? Go to any net to phone service and it costs as little as Rs.2/ per minute and if you have a net phone at home it is as cheap as a rupee a minute. With skype, it is even free. But does anybody pay Service Tax on this? With Geography becoming irrelevant in a net world, new problems in taxations are to be addressed.

Meanwhile the Internet Service Providers’ Association of India (ISPAI) has asked the government to exempt broadband services from levy of service tax for the next five years.

India now has just under 2 million broadband connections. We have also failed to meet the targets set by the Broadband Policy, which had envisaged 3 million high-speed internet connections by 2005. And we are nowhere near the target of 10 million broadband connections by 2007. So the association wants exemption from Service Tax and Income Tax. They have also suggested

1. Rs 6,000 per annum allowance to employees for broadband services access at home.

2. Allow deduction of tax for expenditure for broadband

3. nil duty for imports by ISPs

4. Sales tax exemption for e-commerce