The Telecom Regulatory Authority of India (Trai) has issued recommendations on licence fee and policy matters of DTH (direct-to-home) services in accordance with amendments carried out by Department of Telecommunications (DoT) that had rationalized the definition of Adjusted Gross Revenue (AGR) and Bank Guarantee (BG) quantum, respectively, under structural reforms.
DTH operation in India is governed by the policy guidelines for obtaining licence for providing DTH broadcasting services. These guidelines prescribe a licence fee (LF), which is a non-tax fee levied on a service provider against the privilege of being permitted to carry out a licensed activity. As per the provisions of the guidelines, DTH operators are required to pay an LF, which is 8% of AGR on a quarterly basis to the I&B ministry.
Further, BG is a type of financial instrument to ensure that service providers pay their dues on time and are obligated to fulfil the terms and conditions of the licence agreement. The extant DTH guidelines prescribe a BG for an amount of ₹5 crore for the first two quarters, and thereafter, for an amount equivalent to LF for two quarters and other dues not otherwise securitized.
The recommendations state that Gross Revenue (GR) shall comprise revenue accruing to the licensed entity by way of all operations or activities and inclusive of all other revenue or income on account of interest, dividend, rent, profit on sale of fixed assets, miscellaneous income and so on without any set-off for related items of expense.
The recommendations also provided certain explanations with the definition of Applicable Gross Revenue (ApGR), which for arriving at the revenue calculations for licence fee should be equal to the total GR of the licensee as reduced by the revenue from activities under a licence or permission issued by DoT, reimbursement, if any, from the Government; and a list of other income.
Further, AGR is calculated by excluding GST paid to the Government from the ApGR, if ApGR had been included as a component of GST.
Trai has also said that the ministry of information & broadcasting (MIB) should revise the Form-D (the Statement of Revenue and Licence Fee for DTH licensees) and adopt the format of Form-D as prescribed in the recommendations. The process for the submission of Form-D should be made end-to-end online with facility to upload all the related documents in digital mode via a single window system. MIB should develop a robust mechanism for deduction verification process through a single window portal.
DTH licensee should pay an annual licence fee equivalent to 3% of AGR. Licence fee for DTH licensees should be brought down to zero in the next three years. DTH licensees should not be charged any licence fee after the end of the financial year 2026-2027.
The licensee should submit an Initial Bank Guarantee from any Scheduled Bank to the MIB for an amount of ₹5 crore for the first two quarters. Thereafter, the licensee should submit a BG (covering Financial and Performance Bank Guarantee) from any Scheduled Bank to the MIB for an amount equivalent to the Initial Bank Guarantee (i.e., ₹5 crore) or 20% of the estimated sum payable, equivalent to licence fee for two quarters and other dues not otherwise securitized, whichever is higher.
Once the licence fee becomes zero, the licensee should submit a BG (Performance Bank Guarantee) for a fixed amount equivalent to the initial Bank Guarantee (i.e., ₹5 crore) from any Scheduled Bank to the MIB, which should be valid for a minimum of one year and renewed every year to ensure it remains valid for the entire currency of the licence agreement. The licensor should be at liberty to encash the BG in full or part in the event of violation of any of the licence conditions. Electronic Bank Guarantee should be encouraged and permitted for ease of doing business, Trai has said.
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Updated: 21 Aug 2023, 08:24 PM IST
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