Reliance Communications Moves Sc In A Tax Matter !

[Honest 836]

Reliance Communications moves SC in a tax matter

21 Sep, 2008, 1834 hrs IST, PTI

NEW DELHI: Anil Ambani-promoted Reliance Communications has moved the Supreme Court challenging the imposition of VAT by the Andhra Pradesh government on its recharge vouchers and value added services.

The Supreme Court will hear the plea on September 29. The telecom company has challenged an Andhra Pradesh High Court order that asked it to pay one third of Rs 43 crore, the alleged incurred tax liability, on or before September 30.

The Andhra Pradesh government has imposed 12.6 per cent VAT on Get Started Kits (GSKs) and recharge coupons, and 4 per cent VAT on SMS, ringtones, and games by treating these services as 'goods'. It has also asked Reliance to shell out more than Rs 42.93 crore under AP VAT Act.

Though the single bench of the HC had stayed the recovery of VAT from Reliance, the division bench had modified the order to an interim stay. The bench held that the interim stay would continue only if Reliance pays one-third of the incurred tax liabilities on or before 30th September and the same would stand vacated in case of any default.

Challenging the levy of VAT, Reliance said that GSKs are also paper vouchers like recharge vouchers and were meant to activate the account and connection of the subscribers. It becomes a waste paper after activation and, therefore, it was identical to recharge vouchers and hence cannot be treated as 'goods'.

Recharge vouchers and GSKs cannot be considered as 'goods' as the same are merely advance collection for the fee charged by the service provider and would not fall within the meaning of 'goods' as defined in AP VAT Act, according to petition.

Value added Services like SMS, ringtones, games etc are pure services and beyond the comprehension of the term 'goods', it said.

[Sadikk 301]

Very well move by AP government but whats the use.

A robber is robbed.

[Puneet 0]

Robber is not robbed - it would be the customer who pays in the end as all taxes are recoverable from the end user. If SC doesn't gives a favourbale decision for Reliance expect a slew of VAT demands by all other state governments on telecom companies and an assocaited rise in tax component of all recharge vouchers etc.

[KumaarShah 143]

AFAIK, the GSKs and paper vouchers etc are treated as a service and are charged service tax also, If so, then how can the same be treated as goods and subject to VAT also? This is real stupidity on AP side, they will lose the case in the SC.

[Arun 795]

Reliance Communications’ plea against Andhra tax dismissed

September 30th, 2008 - 12:04 am ICT by IANS

The Supreme Court Monday dismissed a lawsuit by Anil Ambani-promoted Reliance Communications challenging an Andhra Pradesh High Court order asking it to pay the state government one-third of the Rs.430 million value added tax (VAT) imposed on the sale of its recharge vouchers.A bench headed by Justice S.B. Sinha dismissed the lawsuit and asked the high court to dispose of within four weeks the company’s plea against the state government order for imposing VAT on its recharge vouchers and various value added services.

The high court had asked Reliance Communication to first pay one-third of its tax liability to the government before Sept 30. It said it would adjudicate its plea only after the money was paid.

The Andhra Pradesh government has imposed 4 to 12.6 percent VAT on Reliance Communication mobile telephone recharge vouchers and various types of value-added services provided by it.

Though a single bench of the high court suspended the recovery of tax from Reliance, a division bench of the same court modified the order and turned it into an interim stay. The bench ruled that the interim stay would continue only if Reliance paid one-third of its tax liabilities on or before Sep 30 and that the order would stand cancelled in case the company defaulted.

Reliance challenged the levying of the tax, contending its get-started-kit (GSK) was like a recharge voucher and was meant to activate the account and connection of a subscriber.

It contended that like recharge vouchers, GSKs become waste paper after activation of connection and, therefore, were identical to recharge vouchers. Hence, they could not be treated as “goods” on which VAT is imposed, the company maintained.

Recharge vouchers and GSKs cannot be considered to be “goods” as these only served as an advance collection mechanism for the fee charged by the service provider and would not fall within the meaning of “goods” as defined in the Andhra Pradesh VAT Act, Reliance contended.

Similarly, value added Services like SMS, ringtones and games were pure services and thus, beyond the definition of the term “goods”, the company said.

[commonman 228]

If the High Court upholds the imposition of VAT, all consumers should move Court to the effect that since the recharge vouchers including talktime has been considered as Goods they do not fall under the category of Services and hence the levy of 12% service tax is illegal. So only 4% VAT instead of 12% Service Tax should be charged.

[KumaarShah 143]

^^^

Exactly.

But what does the SC order imply for RCOM? Does it have to pay the VAT? Then all subscribers can definitely ask for refund of 8.6% excess collected. (12.6% ST less 4% VAT)

But the AP govt. is demanding 12.5% VAT and not 4% VAT if I remember right.