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Our Bureau

`Cannot be equated with goods'; operators' burden to drop by Rs 10,000 cr

New Delhi , March 2

In a huge relief to telecom consumers and operators, the Supreme Court today held that States cannot impose sales tax on the service provided by the telecom companies. The decision is likely to bring down the burden on telecom operators by as much as much Rs 10,000 crore annually.

Bharat Sanchar Nigam Ltd will be the biggest beneficiary since it is the largest operator in the country.

Reacting to the decision by the apex court, Mr T.V. Ramachandran, Director General, Cellular Operators Association of India (COAI), said, "We are elated with the decision today by the Supreme Court since it will bring a huge relief to consumers. The sales tax by the States was resulting in double taxation which was costing private operators around Rs 5,000 and BSNL Rs 5,000 crore annually."

Delivering the order, a Bench headed by Ms Justice Ruma Pal, said that the telecom services cannot be equated with goods as they did not include electromagnetic waves or signals. The court held that the sales tax will, however, be liable on mobile handsets.

With respect to imposition of sales tax on SIM cards, the Bench left it to the authorities concerned to decide on the matter.

The court also did not cover the issue of inter-state transaction. The nature of transaction may be composite and it is possible to tax only the sale element, which is the handset. The value of services cannot be included in the meaning of goods, the court said.

"The imposition of sales tax on any facility of telecom service is untenable in law," the Bench said.

The order comes as welcome relief to the telecom industry, which has been reeling under the Finance Ministry's decision to increase service tax from 10 per cent to 12 per cent as part of the Union Budget 2006-07.

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