Sale of SIM cards eligible for tax
By James Paul | 16 Feb 2002
Kochi:
A division bench of the Kerala High Court has held that the sale
of SIM cards is eligible for sales tax under the Kerala Sales Tax
Act and the sale of SIM cards and the process of activation are
eligible for service tax on the value of taxable service.
The bench said this while disposing of a writ petition filed by
BPL Mobile Cellular, challenging the Telephone Regulatory
Authority of Indias order and a trade circular dated 16 April
2001, proposing to impose 7 per cent sales tax on the sale of SIM
cards. It also challenged the notice issued by the central excise
joint commissioner to remit a service charge of Rs 7,40,480 in
respect of 14,476 SIM cards sold by BPL.
The sale of SIM cards is, without any doubt, eligible for sale
tax, so the activation charges paid are in the nature of deferred
payment of consideration for the original sale or in the nature of
value addition and, therefore, amounts to parts of the sale and
becomes eligible for sale tax, the bench said.
Both the sale of SIM cards and the process of activation are
services provided by mobile cellular telephone companies to their
subscribers and so they squarely fall within the definition of taxable
service as defined in section 65(72)(b) of the Finance Act.
They are also eligible for service tax on the value of taxable
service as defined in section 67 of the same Act.
The
bench, comprising Chief Justice B N Srikrishna and Justice M
Ramachandran, also left open the issue as to whether the sale of
SIM cards represents the transfer of rights to use an immovable
property as the arguments before the court proceeded on the
assumption that it was the transfer of rights to use a movable
property. Departmental authorities are free to decide this issue
in accordance with the evidence before them, the court said.
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