VAT cut on phone chargers defies Supreme Court

THIRUVANANTHAPURAM: In a secret and hasty move that smacks of an underhand deal with mobile phone companies, the state government has flouted a Supreme Court verdict and  arbitrarily fixed the value added tax (VAT) on mobile chargers at five  percent.

The apex court in November 2014 had ruled that mobile chargers should be taxed at 14.5 percent. The opposition of the commercial sales tax department, hit by falling revenues, to the move was also brushed aside.

What’s more, the decision has also been given retrospective effect all the way up to April 1, 2005, the time VAT came into force. As a result,  mobile companies that have been asked to pay penalty for not remitting tax at 14.5 percent for all these years will be left off the hook.

As a consequence, the state is estimated to lose at least Rs 300 crore. Cell phone companies like Nokia, LG, Samsung, Lenova and Micromax were selling chargers since the time VAT came into force.

The Supreme Court in 2014 had ruled that a charger was a mere accessory of a cell phone and, therefore, should be taxed higher.

Promptly, the CST department sent notices to cell phone companies operating in the state to compensate for the short levy. It is estimated that a popular brand sells on an average 8 lakh cell phones yearly.

It was in a petition filed by the tax department of Punjab against Nokia that the Supreme Court ruled in November 2014 that a mobile charger has to be treated separately from a cell phone for the purpose of collecting tax.

This verdict has been jettisoned by the state in the cover of dark. Instead of announcing the decision through the budget, which will be presented in a few days, an internal notification was issued. It looked so rushed that even the GO number is left blank in the notification.

CST officials are in a state of disbelief. A source said that mobile phone companies, though they sought a penalty waiver, were willing to pay the tax. “Companies like Samsung and LG had set apart Rs 300-400 crore to pay off their arrears after the Supreme Court order. But this notification has suddenly absolved them of all liability,” the source said.