India Considers Taxing Mobile Data Usage to Boost Revenue

The government could earn nearly ₹30,000 crore by taxing ₹1 per GB of mobile data used by Indians at current usage patterns, said IIFL Capital in a note, but cautioned that such a levy could raise customer spending on mobile recharges or bills by about 20 per cent, taking the effective tax to 29–40 per cent, including 18 per cent GST.The note, seen byBusiness Standard, draws inferences from media reports on the Prime Minister’s Office asking the Department of Telecommunications (DoT) to study the possibility of levying a tax on data usage. While the parameters of the study or even its broad contours are yet to be determined, the DoT has time till September this year to come up with findings. The DoT follows a typical process of undertaking stakeholder consultation through the Telecom Regulatory Authority of India (Trai), and sector watchers believe this would be the way forward this time as well.The government’s intention appears to be twofold — drawing more revenue from the sector and discouraging non-useful data consumption, or in other words, attempting to reduce heavy viewing of short videos, reels and other social media content, especially among teenagers and young adults.On the fiscal side, IIFL noted that, assuming an annualised data usage of 293,293 petabytes by Indians, the government could get ₹279,709 million (Rs 27,971 crore) by charging ₹1 per GB tax.“If we assume Re 1/GB on the reported mobile data traffic, annual government receipts will amount to ~10 per cent of industry mobile revenue and 0.1 per cent of GDP. The fiscal gains from such a measure do not appear to be significant,” it added.Also ReadNo windfall tax on diesel, ATF exports from Reliance SEZ refineryTiger Global ruling concerns: CBDT exempts pre-FY18 investments from GaarPriced out of India's digital revolution: Taxes weigh on smartphone demandpremiumCBDT issues revised DIN norms, replaces 2019 circular on tax noticesFY26 marks sweeping tax overhaul with new income tax law, GST reformspremiumIIFL added that the approach will be unjust for subscribers who use less than 2 GB/day on most days and only require 2 GB/day for, say, five days in a month. It also noted examples of only a handful of countries that have implemented a data tax, including Uganda, Hungary, Tanzania and Zambia, with Hungary having withdrawn the proposal to levy the charge.However, IIFL said that any such levy would be regressive since the impact will be borne disproportionately by lower-income groups who may not have access to Wi-Fi or fixed broadband. Further, it would cramp telcos’ headroom to undertake tariff hikes and force them to rejig plan structures.“If Re 1/GB tax is applied on daily data allowance offered by packs, the increase in customer outgo could be quite sharp, at 9–19 per cent. While imposition on actual data usage may be fairer, it may be difficult for the government and Trai to monitor this at a granular level,” it said, adding that such a move was unlikely to be implemented.It also noted that identifying good or bad data usage would be difficult and if a blanket tax was levied, productive use cases in education, healthcare, etc. would end up getting taxed at an elevated rate. “Data usage tax will also be a regressive measure since the top end of the customer pyramid has access to Wi-Fi at homes and offices. We believe that telcos, consumer groups and OTT players are likely to oppose this in Trai's consultation process, making the chances of implementation remote,” it added.