Idea Cellular's deal with Videocon to buy 4G spectrum is likely to be "restructured" as the telecom operator may be liable to pay Rs 496 crore in taxes if the deal doesn't get completed before June 1 this year.
In its budget presented this week, the government proposed to levy service tax on spectrum trading deals starting June.
"The additional service tax would logically get subsumed within Idea's overall costs in the context of the spectrum-trading transaction with Videocon, but there is a possibility that both companies may have to restructure the deal if it does not close before June 1," a person familiar with the matter, told The Economic Times.
In November last year, Idea Cellular had agreed to buy spectrum for two circles â€” Gujarat and Uttar Pradesh (West) â€” from Videocon for Rs 3,310 crore, which was double the amount paid to acquire spectrum for those circles in the March 2015 auction.
Idea, India's third-largest telecom carrier, had said it would use spectrum bought from Videocon to roll out 4G LTE services in the two circles.
"The only way Idea can skirt the additional service tax levy is by closing the spectrum trading deal with Videocon by May 31 latest, since the new rule will be effective June 1," tax expert Dinesh Kanabar, CEO of Dhruva Advisors, told the daily.
However, the new service tax may not impact the spectrum sharing deals made by Reliance Jio and Reliance Comminucations (RCom). "The provisions are not retrospective and their deal is already done with relevant payments made by Jio," said experts.
[1 lakh = 100,000 | 1 crore = 10 million | 100 crore = 1 billion]