Indian Telecom Industry is one of the fastest growing Telecom Industry in world adding close to 8 millions every month. But all is not well and finance ministry is not satisfied with the revenue posted by telecom which indirectly is affecting service tax collected by the government.

As you may be aware that tariffs in India are lowest in the world, Average Revenue per User (ARPU) for all the operators has come down drastically in the last few months. This is due to new roll outs and penetration in rural India where new subscribers are comparatively making less usage which has further brought down the overall ARPU. Despite the fact that Minutes of Usage (MOU per Sub) in India is second only to United States, operators are not making enough money due to low tariffs and wafer thin margin. Another possible reason for decline in service tax collection from Telecom Industry is excessive capital expenditure and roll out by them, the cenvat credit of which can be set off against service tax payable to the government.

Service tax is major source of revenue for the government and finance ministry is not at all happy at this unusual behaviour from telecom world. If we go by numbers, overall service tax collection has mopped up by 35% where as service tax collection from telecom industry is significantly down by 45% during first half year in spite of record number of subscriber addition. A special audit of the sector is ordered by Director General of Service Tax to investigate into the matter.

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