New Delhi: The 12 per cent service tax imposed on Internet telephony has hit the Internet companies hard. Net phone was included in the service tax in Budget 2006-07. Internet companies feel that this will not bode well for the booming broadband market.
The prospect of talking to friends and family abroad at half the rate charged by telephone companies, made Internet telephony a very popular option.
That is why Internet companies are fuming at the Finance Minister's decision to charge a 12.24 per cent service tax on Internet telephony.
The Internet Service Providers Association of India feels that a large proportion of broadband customers buy connections just to use net telephony. Now they fear that the increased costs will hamper the sales.
"Service tax on net telephony can result in Broadband connection sales," says Deepak Maheshwari, Sec ISPA.
By 2005 the target was to sell 3,00,000 broadband connections in the country but just 30 per cent of it was fulfilled. ¤
According to IASPI the Rs 25 crore worth of sales in the last quarter is simply not good. There is a general consensus that Internet telephony has the potential to garner higher growth for broadband and Internet connections.
ISPs feel that consumers prefer Internet telephony because it is the cheaper way to make international calls. And for Internet service providers this was the perfect bait for getting people to take up broadband connections.
But according to industry analysts, the Finance Minister has managed to kill off some of the enthusiasm.
With inputs from Raheel Khursheed
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