Casbaa protests retrospective tax on foreign satellites

NEW DELHI: The Cable and Satellite Broadcasters Association of Asia (Casbaa) has protested the decision of the Indian Government to impose a 10 percent royalty fee on foreign satellite communications services and make the fee retroactive to cover the last 36 years.

In a letter to Finance Minister Pranab Mukherjee, Casbaa said the rule’s retroactive feature “is against the basic international rules and principles of fair play.”

It also warned that if approved by Parliament, this new tax will cripple Indian broadcast and other communications at a time when India faces a shortage of domestic satellite bandwidth.

Casbaa, which has 130 members in the Asian region, said the Finance Bill 2012 would characterise fees paid to non-Indian satellite operators as a royalty subject to a minimum 10 per cent withholding that would be forwarded to Indian tax authorities.

Casbaa said international tax treaties have refused to class satellite communications services as a royalty, which means the satellite operators can‘t be permitted to claim a tax credit in their home countries. This is equivalent to double taxation and would put India in breach of tax treaties that the Indian government has signed.

Even more striking is the retrospective nature of the proposed law that would claim the 10 per cent withholding for payments made since 1976, the year that this section of India’s tax law first addressed foreign royalty payments.

Casbaa said the tax amendment would merely clarify the royalty definition and make it applicable to transactions back to 1976, but that certain concepts in the proposed amendment — including conversion for downlinking of any signal — barely existed in India in the 1970s.

“It is inconceivable to think that a concept that did not exist in 1976 was intended to have been present in the original legislation,” Casbaa said in the letter sent by its chief executive Simon Twiston Davies.

Casbaa said its members now represent about 54 per cent of the total satellite bandwidth used by or on behalf of Indian media and corporate customers.

Casbaa said that, faced with a 10 per cent withholding that cannot be compensated by a credit in their own tax homes, foreign satellite operators active in India will be forced to pass on the royalty withholding to their customers.

Because India is facing a shortage of satellite capacity as a result of Isro’s regulatory practices and the inability of India’s domestic satellite system to keep up with demand, “Indian companies have no alternative but to rely on services offered by international operators,” Casbaa said.

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