No separate tax for mobile chargers: Karnataka HC
The order was passed while dismissing a batch revision petition filed by the Commercial Tax Department of Karnataka against the order of the Karnataka Appellate Tribunal which also took a similar stan
Published: 01st March 2023 06:50 AM | Last Updated: 01st March 2023 06:50 AM | A+A A-
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BENGALURU: The Karnataka High Court has ruled that chargers cannot be differently taxed by treating them as separate components from mobile phone sets.
A division bench comprising Justice PS Dinesh Kumar and Justice TG Shivashankare Gowda passed the order stating that a mobile charger shall be classifiable as a ‘mobile phone’ as per the notification issued under the Karnataka Value Added Tax (KVAT) Act. The order was passed while dismissing a batch revision petition filed by the Commercial Tax Department of Karnataka against the order of the Karnataka Appellate Tribunal which also took a similar stand.
It has come as a big relief to customers as well as several telecom equipment companies including Airtel, Samsung, Sony and others. The earlier order passed by the Tribunal in their favour on March 10, 2021, was challenged by the Commercial Tax Department.
‘No means to set value of individual goods’
On September 6, 2008, the Commissioner of Commercial Taxes, under Section 59(4) of the Act, issued a clarification that mobile chargers attract tax at 12.5%. This was challenged by the telecom companies before the Tribunal.
The Tribunal held that the ‘mobile phone chargers’ sold along with the phones in composite packs attract tax at the same rate as applicable to ‘mobile phone’ only and it cannot be taxed at a higher rate as unscheduled goods under Section 4(1) (b) (iii) of the Act.
Upholding the stand of the Tribunal, the High Court observed that there can be no doubt that the main intention of a purchaser/seller while buying/selling a ‘mobile set’ is to buy/sell the mobile phone and not the charger alone. Supply of charger, headset, and ejection pin is incidental to the sale. Therefore, the Dominant Intention Test would apply to the present case and hence, the charger cannot be differently taxed, the court added.
“A perusal of Section 4 (charging section) of the Act and Rule 3 (computation provision) of KVAT Rules would clearly indicate there is no prescribed mechanism for determining the value of individual goods in a composite transaction,” the court said. “In its absence, this court is of the considered view that the charger sold along with the mobile phone in one set, is accordingly taxable at 5 per cent.”
