The department of telecommunications (DoT) supports the telecom operators on the issue of levying service tax on spectrum. Sources said that the ministry may soon suggest the finance ministry to withdraw the service tax in the larger interest of the sector, according to a ministry official.

Earlier, Assocham, an industry lobby group, warned that the proposal to levy 15 per cent service tax on all spectrum allotments and transactions among licensees will put initiatives of Digital India and Smart Cities at risk.

Terming assignment of spectrum as a sovereign function, something not viewed as an economic activity globally and as such not liable to tax, Assocham said taxing sovereign functions is extremely regressive and the impact of this for developing countries like India is far more punitive than developed economies.

"Service tax on spectrum assigned by the government to telecom operators is detrimental to the growth of industry while increasing cost of provision of service and directly impacting the common man," Assocham said in a letter to Finance Minister Arun Jaitley.

"The proposed levy of service taxes on spectrum, estimated at Rs 30,000 crore (in year one itself), will further push the industry teetering to the edge of financial distress." It argued that this is against the National Telecom Policy, 2011, focus of which is on affordability and accessibility.