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February 3, 2001
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Money > Business Headlines > Report February 3, 2001 |
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Govt may levy 5% service tax on ISPsFor the first time in the history of Indian IT, the government is initiating a move to impose a 5 per cent service tax on Internet service providers (ISPs). The Indian ISP market is estimated to generate revenues to the tune of over Rs 4 billion per year, with a major chunk being generated by the top five ISPs, which include VSNL, Satyam, Mantra and MTNL. The industry believes the move will prove fatal for the already loss-making Indian ISPs. "None of the ISPs are earning profits," an analyst said. Moreover, the move to impose a 5 per cent service tax will also upset the business models of various ISPs. "ISPs offering free Internet service are already finding it difficult to go ahead with their plans. Many of them operate on a thin margin due to depleting advertising revenue. A 5 per cent service tax may put many of them out of business," an industry observer pointed out. "Now for a user, the dial-up charges for the Internet connection may work out to be about Rs 5 per hour. The ISPs will not be able to absorb the extra cost and they may pass it on to the consumers, resulting in an increase of Internet service charges," he added. Currently, India is estimated to have about 2.5 million Internet connections UNI |
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