In recent times, India’s Leading Telecom Companies have reported record losses. It was after the Supreme Court issued rulings on the definition of Adjusted Gross Revenue or AGR. The SC judgment commanded private TSPs (Telecom Service Providers) to pay higher sums towards telecom license fees as well as spectrum usage fees. Both these monetary requirements depend on the value of AGR return filing. It is said that the Telecom Operators’ liabilities towards the AGR charges, which also include interest and penalties, are estimated to be 1.3 lakh crore rupees.
Why AGR Dues?
In 1994, the Indian telecom sector was liberalized under the National Telecom Policy. Consequently, DoT started issuing licenses to companies in return for a fixed annual license fee. To relieve such steep licensing fees, the Union government in 1999 allowed the Telecom licensees to migrate to a revenue-sharing fee model as AGR dues.
AGR Return Filing Compliance
Under this amendment, mobile operators must share a percentage of their AGR with the Union government as the following:
- Annual License Fee ALF
- Spectrum Usage Charges SUC
License Agreements between the Department of Telecommunications and the Telcos define their gross revenues. Afterwards, the AGR is computed after certain deductions from these license agreements. Based on the agreement, ALF and SUC were set at 8% and between 3-5% of AGR, respectively.
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Dispute between DoT & Telcos
The dispute between DoT and the Mobile Operators was on the AGR definition. The Authority argued that AGR includes all revenues before discounts from telecom as well as non-telecom services. But the companies claimed that AGR must comprise the revenue accrued from core services but not any of the following:
- Interest Income
- Profit on Sale of any Investment
- Fixed Assets
Why was DoT’s view of the AGR returns filing upheld?
In 2005, COAI (Cellular Operators Association of India) challenged the Union’s definition for AGR calculation. Also, in 2015, the Telecom Disputes Settlement and Appellate Tribunal ruled in favour of Telecom Companies. The Tribunal said the AGR must exclude capital receipts and revenue from non-core sources. Such non-core sources can be rent, profit on the sale of fixed assets, dividends, and other incomes.
But overcoming TDSAT’s order, the Apex Court upheld the definition of AGR as given by the DoT.
Why is the Definition of AGR important?
AGR has been such a contentious issue. AGR has huge financial implications for Telecom Companies and the Government. The revenue company share with the Union goes into the CFI (Consolidated Fund of India). After the SC’s judgment, it estimates that the Telcos owe the government about 92,000 crore rupees. These charges are in bank charges, interest, and penalties on license fees alone.
Why should you care about filing AGR dues?
If you are a telecom company, then this judgment is a huge blow to your industry. If most Telecom Companies haven’t timely provided for AGR dues in their accounts, then they will incur one-off losses. In addition, with lower earnings per share, the Telcos may have to prepare for more financial instability that could further erode their net worth.
To know more about the AGR filing process and eligibility, connect with the DoT experts at Registrationwala.