The Hindu : Business : States restrained from levying sales tax on VSNL

Online edition of India's National Newspaper
Tuesday, Sep 27, 2005

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Business

States restrained from levying sales tax on VSNL

Legal Correspondent

Company challenges the legislative competence of States

NEW DELHI: The Supreme Court on Monday restrained the States and Union Territories from levying and collecting value added tax/sales tax from Videsh Sanchar Nigam Ltd (VSNL) for providing telecom services, including broadband Internet, to its subscribers.

A bench comprising Justice Ruma Pal and Justice A. R. Lakshmanan, after hearing senior counsel, C. S. Vaidyanathan, restrained the respondent States from either raising any demand or pursuing any assessment proceedings or collection of dues. VSNL had challenged the legislative competence of States to levy local taxes on it services. The bench issued notice to the Centre and all the States and UTs. In its petition, VSNL submitted that it was using telephone lines owned by the Bharat Sanchar Nigam Ltd or the Mahanagar Telephone Nigam Ltd or other basic telephone service provider for Internet access and Internet services through broadband. Various States were levying VAT/ST on these services on the pretext that these services come within the ambit of `sale of goods.' It said that the imposition of sales tax/VAT was arbitrary and violative of its right to carry on business under Article 19 (1) (g) of the Constitution.

It contended that the levy of such local taxes on Internet services was impermissible and beyond the legislative competence of the States. VSNL further pointed out that it had never collected any sales tax from its consumers and hence the States were not entitled to collect any arrears on account of local sales tax.

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