Sale of SIM cards eligible for tax
16 February 2002
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.