The Supreme Court today admitted a writ petition moved by Bharat Sanchar Nigam Ltd (BSNL) against the department of telecommunications, the Telecom Regulatory Authority of India, and 33 state and union territories, challenging the local sales tax imposed on its revenue. BSNL has argued that providing SIM cards and other goods is a service and does not amount to sale.
Counsel Harish Salve submitted before a Bench comprising Justice K G Balakrishnan and Justice P V Reddi that a curious situation had arisen where if a call was made from Chennai to Mumbai, all the states in between could levy a sales tax on BSNL. This is likely to add Rs 576 crore to the company's tax burden during 2003-04 and subsequent years.
Previous years' arrears on account of this tax will be around Rs 2,560 crore. The company already pays Rs 1,122 crore service taxes to the Centre. On the other hand, BSNL invested Rs 12,532 crore in 2000 for increasing the teledensity in the country to 7 per cent by 2005.
Therefore, the additional burden is not only illegal, but also crippling, it has argued. The court has also issued notices to the state governments on BSNL's application for a stay of the levy.
Since all the states have to reply to the notice, the court is not likely to take up the final hearing before the end of the summer vacation in July.
In February, the Supreme Court had held that telecommunications service providers were liable to pay local sales taxes since goods were tranferred to consumers. However, BSNL argued that there was no transfer of goods, a condition precedent for levy of sales tax.
It further contended that the same transaction could not be treated both as sales and service and taxed twice. It pointed out that so far BSNL had not transferred the tax burden to its consumers.
