TPM

TRAI of late has been examining whether intergrated service providers are passing more of their Mobile STD revenues as NLD revenues and saving on license fee. Also RCOM has been alleged of booking its mobile data revenue as ISP revenues. In both the cases service providers have been charged with passing revenues to entities which is less taxed.
These are classic cases of Transfer Pricing Manipulation (TPM) or in common parlance Transfer Pricing. Though the governement by the Finance Act 2001 is within its right to probe such pricing mechanisms, Service Providers are within their right to pass a higher Carriage fee as long as it is within 65p.
The solution could be to adopt a cost plus approach and reduce the maximum carriage charge. This however will hit BSNL Carriage revenues the most and thus again hit governement coffers. The trick would be to arrive at the optimum maximum Carriage Charge which would maximize governement's earnings.