As
per the 46th Amendment to the Constitution
of India, a clause viz 29A was inserted in Article
366 by which the States were permitted to enact
legislation for levy and collection of tax on a
series of transactions under Entry 54 of List II
to 7th schedule to the Constitution of
India. As per Clause (d) to Article 366 (29A), States
are empowered to levy tax on the transfer of right
to use any goods for any purpose (whether or not
for a specified period) for cash or deferred payment
or other valuable consideration.
As per the amended section 5(1)(iii) of the
KGST Act, the transfer of right to use any goods
for any purpose (whether or not for a specified
period) has been made taxable at the rate of 8 %
at all points of such transfer in the State. The
definition of ‘sale’ in section 2(21) was extended
further by inserting explanation 3B, as per which
a transfer of right to use any goods for any purpose
(whether or not for a specified period) for cash
or deferred payment or other valuable consideration
is deemed to be a sale.
The maiden attempt of the Commercial Taxes
Department was the assessment of telephone rental
collected by the BSNL as per Hon’ble Supreme Court
decision in State of UP Vs Union of India reported
in (2003) 130 STC ISC or (2003) 11 KTR 79 SC.
Bharat Sanchar Nigam Limited provides telephone
service to their subscribers in Kerala. The erstwhile
DOT and the BSNL permitted their subscribers to
use the exchange equipments, the pair of cable leading
to the subscribers premises, overhead alignment
and all other related equipments including telephone
instruments. By allowing to use the telephone instrument,
cable and exchange equipment and get connected to
the required number the subscriber gets a right
to access the network.
In view of the amendments in Constitution and in
section 2(21) read with explanation 3B, the assessments
were made on BSNL by virture of the charging Section
5(1)(iii) of the KGST Act, 1963. The assessments
made Under Section 3F(1) of the UP Trade Tax Act
which is analogous to explanation 3B of section
2(21) of the KGST Act, 1963 were upheld by the Supreme
Court. On receipt of the assessment passed by the
assessing authority, Special circle, Thiruvananthapuram,
the BSNL filed OP No. 5198/03 and the Kerala High
Court issued stay on collection, but ordered that
assessment can be proceeded with till a decision
is taken by the Supreme Court on the Civil Appeal
filed by the BSNL against the UP decision reported
in (2003) 130 STC 1 SC vide CA No. 2408/02 dt. 25.09.03.
It is also understood that the BSNL is not paying
tax on the sale of SIM Card which was held to be
goods and its sale is taxable as held by the Kerala
High Court in Escotel Mobile Communications Ltd.
Vs Union of India reported in (2002) 10 KTR 318
KR.
The analogous provision of the Kerala Value Added
Tax Act, 2003 is explanation V of clause 43 of section
2 and section 6(1)(e). As per the charging section
6(1)(e) the transfer of right to use any goods for
any purpose (whether or not for a specified period)
is taxable at 4 % at all points of such transfer.
The Special Government Pleader, Taxes, has opined
that the Commercial Taxes Department can validly
make levy of tax on rental collected by BSNL from
customers.
The Reliance India Mobile and TATA Indicom are two
other service providers of telephone facility in
Kerala operating from Ernakulam in the State. Reliance
has transportable telephone service as mobile phone.
TATA Indicom is also having both facilities. They
are not selling SIM card since their system is different.
Hence these two categories can also be assessed
on the telephone rent collected by them on par with
BSNL.
But
no effective steps have been taken by the assessing
authority of Ernakulam to assess these two service
providers. Similarly BSNL is not paying tax on SIM
Card. Assessments have to be completed under
section 22(3) of the KVAT Act, 2003 in connection
with the scrutiny of monthly returns.
In Kerala, Asianet Cable Visions is providing Cable
T.V service to customers in the State. Other channels
are selling times slot also for advertisements in
the channel and when a cable TV operator is receiving
signals of various other TV Channels by installing
suitable equipments and the signals thus received
are extended to his consumer through cables. A person
who is provided with cable television connection
can view various television channels through his
television. The viewer is making payment of monthly
rent. This is similar to telephone rent as opined
by Special Government Pleader, Taxes in his letter
dt. 23.01.04.
The time slot allotted for advertisement in intervals
is also assessable U/s 6(1)(e) of the KVAT Act,
2003 and U/s 5(i) (iii) of the KGST Act 1963 and
this is deemed sale within the extended definition
of sale by virtue of the amendments made to article
366 of the constitution of India inserting clause
29A.
In the light of the facts mentioned above the
officers concerned are directed to goahead with
the assessments of BSNL and other telephone service
providers including cable TV operators for the
rent collected every month.
The Asst. Commissioner (Assmt) spl.Cir. Thiruvananthapuram
is also directed to take up action to assess the
Asianet cable Vision since Asianet cables visions
is an assessee on the rolls of that office.
Sd/
COMMISSIONER
