'Govt's move to reduce service tax rates by 2% would benefit

Cellular Operators Association of India said the government's move to reduce service tax rates by 2% would benefit the end-user. Though the net
impact is very small, it will still offer reprieve to low-end consumers, T V Ramachandran, director general, COAI said.

The 2% reduction in service tax is a positive step by the government taken at a time when the overall economy is facing a slowdown. This move will help stimulate demand for products and services by making them more affordable, thus giving impetus to various measures taken to tide over this downturn, said Manoj Kohli, Joint MD and CEO, Bharti Airtel.

India had 40 crore telecom subscribers at the end of January. At an ARPU (average revenue per user) of Rs 250, the 2% service tax cut translates into a benefit of Rs 5 or a total impact of Rs 200 crore, says Ramachandran.

Total revenues from mobile services in 2007-8 were Rs 76,000 crore. At an average growth of 35%, the revenues for 2008-9 are expected to close at over Rs 1,00,00 crore. Similarly, if projected revenues for 2009-10 are roughly Rs 1,40,000 crore, the money that stays with consumers as a result of the 2% benefit is Rs 2,800 crore.