TRAI simplifies definition of AGR for license fee and spectrum usage

NEW DELHI: After several months of dispute and even court proceedings, the Telecom Regulatory Authority of India (TRAI) on 6 January agreed that the licence fee (LF) and spectrum usage charges (SUC) should continue to be computed based on adjusted gross revenue (AGR).

 The regulator clarified that gross revenue shall comprise revenue accruing to the licenced entity by way of all operations/activities and inclusive of  all other revenue/ income on   account of  interest, dividend, rent, profit on sale of fixed assets,  miscellaneous income etc. without any set-off for  related items of expense.

However in the recommendations on ‘Definition of Revenue Base (AGR) for   the Reckoning of License Fee and Spectrum Usage Charges’, TRAI introduced the  concept of Applicable Gross Revenue (ApGR). ApGR would be equal to total gross revenue of the licensee as reduced by:

(i)   revenue from operations other than   telecom   activities/ operations as well  as revenue from activities under a licence/ permission issued by the Information and Broadcasting Ministry; receipts from the USO fund; and items of 'other income' as listed in  the 'positive list' issued by the regulator.

 Following disputes/litigations between licensor and licensees on definition of  gross revenue and  adjusted gross revenue under  licence(s) granted  by  Department of Telecommunications for  different telecom services and the need to rationalise taxes as stated in the National Telecom Policy  2012, the authority has suo motu decided to  review the  existing  definition of revenue, licence fee  rate and other related matters under section 11(1)(a)(ii) of the TRAI Act.  

 Further, there was also a reference from DoT in last July requesting TRAI to   submit recommendations for delinking of  licensing of networks from delivery of  services by  way  of virtual network operators,  etc., including associated issues such as AGR,  terms  of sharing of  passive and active infrastructure, etc., under the unified licensing regime. A separate consultation paper had been issued in this regard on 5 December 2014 dealing with the issues under reference other than AGR.

 The authority earlier issued a consultation paper on "Definition of Revenue Base (AGR)  for   the    Reckoning  of   License  Fee   and   Spectrum Usage Charges on 31 July 2014”.

Comments   and   counter   comments were received from the stakeholders and an open house discussion was conducted at New Delhi by TRAI with the stakeholders.

 Under the new recommendations, AGR would be arrived by deducting pass through charges from ApGR.  No change is recommended in   the existing definition of pass through charges (i.e.  deductions)  under  different licences to  arrive at AGR  for  the computation of LF and sue except the inclusion of access charges paid by  TSPs providing international calling card services and toll-free charges.


SUC should be levied on AGR of respective telecom services which use access spectrum in operations or providing services.

 Share of USO  levy  in  LF should be  reduced from the present 5 per cent to  3 per cent of   AGR   for   all   licences  with  effect  from    1  April   2015.  With    this reduction, the applicable uniform rate of licence fee would become 6 per cent (from   the present 8 per cent)  of  AGR  viz.  the 3 per cent  of  LF  that directly accrues currently to  the Government will not  change.


ISPs having AGR  less than Rs  5 crore in  a year shall pay  licence fee of Rs 10  lakh or  actual LF based on  the applicable rate, whichever is less.


Minimum presumptive AGR for  the   purpose of LF and SUC should not be  made  applicable  to   any  licence(s)  granted   by   Government   for providing telecom services.


IP-I  services may not be  brought under the licensing regime.


For  simplicity of administration, ease of verifiability and to avoid higher transaction and compliance costs, any netting of amounts paid  to other entities should not be  permitted for  the computation of  AGR  so  as to meet with the  licence condition that  does not   permit setting off  any related item of expense.


Accounting of deductions of pass through charges from ApGR  to  arrive at the relevant revenue base (i.e.  AGR)  for  the computation of  LF and SUC   should be  allowed on  an accrual  basis.  However, in  the   case  of service tax  and sales tax/  VAT collected on  behalf of  the   Government, deductions  from    revenue  should  be   allowed  only  for   the    amount actually paid to the  Government.


(xii)    Intra-circle roaming charges should not   be  allowed as deduction from ApGR   for   calculating  AGR   of   the    telecom  service  provider  for   the purpose of computation of LF and SUC.


The DoT   should  introduce  a  standardized  process of  verification  with   a unique code assigned to each item of revenue and PTC,  along with  clear codal instructions   to    be    uniformly   followed  by    all    licencees  and Controller of Communication Accounts.


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