Allahabad High Court has given interim relief to Paytm (One 97 Comunications Ltd) on a GST dispute over supply of mobile recharge coupons and Direct To Home (DTH) recharge vouchers. Meanwhile, the Central Board of Indirect Taxes & Custom (CBIC) has told the court that it will issue directions within three months.

The main issue is whether supply of mobile recharge coupons and Direct To Home (DTH) recharge vouchers to recipients, who are located in other States, would be inter-state supply or intra-state supply. The company thinks it is inter-state but tax department thinks otherwise which resulted in demand. Accordingly, it raised the demand of ₹1,081 crore (approximately). Now, this demand has been stayed.

During the hearing, lawyer for the company raised argued that the amount of tax has been paid in Uttar Pradesh treating the same to be inter-State supply. However, demand is sought to be raised by the State claiming the same to be intra-state supply. Provisions under Integrated Goods and Services Tax Act, 2017, say that if any amount of tax is wrongly paid, it can be adjusted. However, no interest is payable for such transaction.

Appropriate directions

The company also submitted that for clarification of the issue, the petitioner has made representation to CBIC, on September 7, 2017, however the response is still awaited. Here, lawyer for CBIC informed that the representation made by the petitioner shall be considered and appropriate directions shall be issued thereon by the board within three months.

“In view of the fact that the amount of tax due on the transaction has already been paid and only dispute is whether it is to be treated as intra-State sale or inter-State sale, recovery of the demand raised vide order dated December 3, 2022 shall remain stayed till the next date of hearing,” a division bench of the court said recently. The matter will now be heard on April 27.

Harpreet Singh, Partner with KPMG India says determining the place of supply, location of service recipient etc, as per GST laws at times is not easy, especially in case of services which are intangible in nature. Thus, taxpayers are likely to make mistakes in classifying the services as local or inter-state. “Authorities should ideally adopt a lenient approach, so long as incorrect classification does not result in any loss to the revenue,” he added.