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SC admits BSNL petition on levy of sales tax

By Our Legal Correspondent

NEW DELHI APRIL 21. The Supreme Court today admitted a petition filed by the Bharat Sanchar Nigam Limited challenging the constitutional validity of the levy of local sales tax by many States on telecom services provided by it to consumers across the country.

A Bench, comprising Justice K.G. Balakrishnan and Justice P. Venkatarama Reddy, ordered notice to all the States and the Union Territories and the Telecom Regulatory Authority of India on the question of stay of all further proceedings pursuant to the issue of notice seeking recovery of Rs. 576 crores per annum, in addition to the service tax of Rs. 1,122 crores paid by it to the Union Government.

The BSNL contended that it was providing telecom services to the people and was charging them on that count alone and there was no transfer of goods to consumers warranting imposition of sales tax as was erroneously being done by the States.

Such a levy was beyond the legislative competence of the States, impermissible and unconstitutional.

It would saddle the consumers with an additional burden and result in putting the service out of the reach of millions of people.

It further said that the past recovery of the sales tax by the States would amount to Rs. 2,560 crores.

The petition said the BSNL had a target to increase the teledensity from the existing three to 15 per cent by 2010 with an investment of over Rs. 2 lakh crores in the next seven years.

It would be a serious blow to its efforts if it were to pay sales tax to the States which would have an adverse impact on the growth of the communication sector.

The BSNL contended that several important questions of law were involved in this case, viz, whether provision of telecom services to consumers all over the country was at all amenable to a levy of sales tax since the company was paying service tax to the Union Government for the service rendered throughout the country.

Further, it was a settled law that the same transaction could not be both sales and service and taxed twice and hence the levy of local sales tax on the BSNL was impermissible and against public interest.

It prayed for a direction to prohibit the States and Union Territories from levying or collecting any local sales tax on telecommunication services being provided by the BSNL.

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