Kathmandu: The Supreme Court has scrapped all eight writ petitions filed by Worldlink Communications, an internet service provider (ISP), against the government’s decision to impose Rural Telecommunications Development Fee and royalty charge on maintenance fee collected by the ISPs.    

A division bench of SC Justices Hari Prasad Phuyal and Dr Nahakul Subedi rejected Worldlink's claim by scrapping the petitions on Sunday.    

With the SC's move, the government now can collect royalty and Rural Telecommunications Development Fees (RTDF) from Worldlink Communications which the ISP had refused to pay.    

The SC verdict is likely to add billions of rupees to the state coffers from other ISPs.    

“As the SC has scrapped the writ petitions, the ISPs must now pay the dues,” Govinda Prasad Ghimire, information officer at the Supreme Court, told New Business Age.

The government was unable to collect royalty revenue on maintenance charge from the internet service providers (ISPs) since the fiscal year 2072/073 BS, according to the Office of the Auditor General. The ISPs including Worldlink Communications were found to have evaded the tax by misinterpreting the law. However, the ISPs were paying the Rural Telecommunication Development Fee and royalties from the fees collected from customers for providing internet service.

There has been a dispute between the government and the Internet Service Providers (ISPs) whether to consider the maintenance service provided by the ISPs as a telecommunication service or not and whether to pay a certain percentage of the fees collected by the ISPs to the Rural Telecommunication Development Fee and to the government as royalty.

The government has been considering maintenance as a telecommunication service and has been asking the ISPs to pay two-tier tax.

The Internet Service Providers Association of Nepal (ISPAN) claims that the ISPs have been regularly paying royalties and rural telecommunication development fees to be paid from income from telecommunication services in accordance to the Telecommunication Act, Telecommunication Regulations and Rural Telecommunication Development Fund Regulations. However, the umbrella body of ISPs maintained that there is no legal provision to pay royalties and rural telecommunication development fund fee from income generated from non-telecommunication services such as maintenance services.

The dispute led to the disruption in internet services across the country on May 2 after India’s Airtel, which provides bandwidth to Nepali ISPs, stopped providing the bandwidth for six hours citing non-payment of dues by the Nepali ISPs. The ISPs were unable to clear their outstanding dues to Airtel because the Nepal Telecommunications Authority has not recommended foreign exchange facilities to them since a year arguing that they must first pay the Rural Telecommunication Development Fee and royalty. Airtel provided the bandwidth after assurance from the government and the ISPs that they will pay the dues.

The Ministry of Communications and Information Technology had formed a study team led by Joint Secretary Gaurav Giri to probe into the tax evasion from the ISPs. The study team pointed out that nine ISPs were liable to pay Rs 3.64 billion in royalty revenue and Rural Telecommunications Development Fees to the government. Under the headings, the Worldlink Communications alone has to pay Rs 1.96 billion.   

On the other hand, the Nepal Telecommunication Authority, the regulatory body of the telecommunication sector, had published a list of 48 internet service providers (ISPs) in August for not paying the royalty amount and taxes under the heading of the Rural Telecommunication Development Fee.

According to the report published by the NTA in last December, 77 internet service providers had deposited more than Rs 1.67 billion. There are currently 128 internet service provider companies and 23 network service provider companies registered in Nepal.