Broadband ISPs taxed for "generating light energy"

Tue Oct 10 15:36:41 UTC 2006

Notice the date: October 10. That is the Indian equivalent of our April 1.

Joe

owner-nanog at merit.edu wrote on 10/10/2006 10:28:13 AM:

> 
> .. because they provide internet over fiber optic cables, which workby 
sending
> pulses of light down the cable to push packets ..
> 
> http://www.hindu.com/2006/10/10/stories/2006101012450400.htm
> 
> So they get slapped with tax + penalties of INR 241.8 million.
> 
> ________________
> 
> 
> Broadband providers accused of tax evasion
> 
> Special Correspondent
> 
> Commercial Tax Department serves notice on Airtel
> 
> # Firms accused of evading tax on sale of `light energy'
> # Loss to State exchequer estimated at Rs. 1,200 crore
> 
> Bangalore: The Commercial Tax Department has served a notice on Airtel, 
owned
> by Bharti Televentures Ltd., seeking payment of Rs. 24.18 crore as tax,
> interest and penalty for the sale of `light energy' to its customers for
> providing broadband through optical fibre cables (OFC).
> 
> The department has been investigating alleged tax evasion by OFC 
broadband
> providers, both in the public and private sectors, for selling 
lightenergy to
> customers. "While the assessment on Airtel was completed and a 
> notice issued to
> it for alleged tax evasion during the year 2005-06, no assessment has 
been
> concluded on other OFC broadband providers," A.K. Chitaguppi, Deputy
> Commissioner of Commercial Taxes, said. Other OFC broadband providers 
facing
> tax evasion charges are public sector BSNL and private sector VSNL, 
Reliance,
> Tata Teleservices and Sify.
> 
> The Commercial Tax Department has estimated a loss of Rs. 1,200 
> crore to the State exchequer in this regard since OFC broadband 
> providers have been operating in the State for several years.
> 
> Mr. Chitaguppi said that OFC operates on light energy, which is 
artificially
> created by the OFC providers and sold to customers for the purpose of 
data
> transmission and information, on the OFC broadband line. Without such 
energy,
> data or information cannot be transmitted.
> 
> "Whoever sells light energy is liable to pay VAT as it comes under 
> the category
> of goods, and hence its sale constitutes taxable turnover attracting VAT 
at
> 12.5 per cent," he said.
> 
> Bharti Televentures had approached the Karnataka High Court seeking to 
quash
> the demand notice, but failed to get a stay when the case was heard by 
Justice
> Shantanu Goudar on September 1. The judge rejected Bharti's plea seeking 
issue
> of an injunction against any initiatives from the Commercial Tax 
Department on
> the recovery of the tax.
> 
> Bharti Televentures had contended in the High Court that re-assessment 
orders
> passed by State tax officials and the issue of demand notice was not 
valid as
> the disputed activity fell under the provision of service tax levied by 
the
> Union Government and did not attract VAT. The High Court is expectedto 
take up
> the case for hearing again in the next few days.
> 
> `Business venture'
> 
> The Commercial Tax Department has argued that the OFC broadband 
operators are
> running a business venture after investing thousands of crores to put in 
place
> a state-of-the-art set-up to artificially generate light energy and 
supply it
> to its customers for their data transmission work. The characteristics 
of the
> light energy constitute a moveable property, which has to be categorised 
as
> `goods' as per the norms laid down by the Supreme Court. "In the process 
of
> data transmission, other than light energy, no other elements are 
involved and
> the customers are paying for the same. This proves that light energy
> constitutes goods, which is liable for levy of tax. Therefore, the State 
has
> every legal competence and jurisdiction to tax it," the department has
> contended.
> 
> It has taken serious note of the non-payment of taxes by the broadband 
service
> providers. "Reporting a turnover and then claiming exemption is one 
thing. But
> some of the OFC operators don't even report their turnovers," Mr. 
Chitaguppi
> alleged.
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