service tax on interconnection service provided by one telecom operator to another – amendment only prospective
Board is in a good mood; here’s another good clarification.
The interconnection service is provided by one telegraph authority to another to enable the telephone subscribers of these telegraph authorities to connect with each other. Interconnection in technical terms means the commercial and technical arrangements under which service providers connect their equipment, networks, and services to enable their customers to have access to the customers, services, and networks of other service providers. For providing interconnection, the telegraph authority collects interconnect usage charges (IUC). A question has been raised as to whether this service is taxable and accordingly, whether service tax is applicable to IUC.
Recently we had reported a decision of the Tribunal which held that A telecom authority's link to another telecom authority cannot be considered as to a subscriber- The charges collected by them cannot be treated as towards the services rendered as leased circuit services. -
In Finance Bill, 2007, a new definition of ‘telecommunication service’ has been incorporated vide clause (104) of section 65 of the Finance Act, 1994 and IUC has been specifically incorporated in the definition of ‘telecommunication service’ to make it a taxable service. Further, any service provided or to be provided, to any person, by a telegraph authority in relation to ‘telecommunication service’ has been made taxable. This amendment will come into effect from a date to be notified by the Government after enactment of Finance Bill, 2007. Therefore, after this amendment comes into effect, service tax would be applicable to IUC charges.
Board has now clarified that
for the period prior to the date when the amended definition of “telecommunication service” comes into effect, service tax is not applicable to IUC.
Circular No. dated, the 12thMarch, 2007