HYDERABAD: A division bench of the AP High Court comprising justice VVS Rao and justice Ramesh Ranganathan allowed a batch of nearly 100 petitions and declared that services like rechargeable coupons, value added services, SIM cards (pre-paid and post-paid) come under telecom services and not goods and thus do not attract sales tax.The bench clarified that sale of instruments, modems, mobile handsets which do not include the service element are taxable as sale of goods.The bench remanded the cases for consideration of the issue relating to whether the deposits - refundable or non-refundable are to be taxed based on the principles laid down in the judgment.A number of service providers including Tata, Aircel, Bharat complained in their petitions that the act of imposing sales tax on various parts of mobile phones is illegal as there was no sale of goods.They may attract service tax but cannot be taxed as goods under the Sales Tax Act, the petitioners said.Speaking for the bench justice Ramesh Ranganathan said that SIMs come under telecom services and not sale of goods and hence imposing sales tax was an act without jurisdiction.The judge also pointed out that mobile rentals cannot be construed as sale of goods.By taxing the same as sale of goods the taxing authority had exceeded the jurisdiction under the statute, the bench said.Pointing out the nature of value added services, the bench reasoned they were not recorded in a physical medium before they are marketed.Messages carried by means of electromagnetic waves cannot be goods.However dealing with telephone instruments and mobile handsets, the bench said sales tax is valid provided it does not include the service element of the composite transaction of sales and service.The bench applied the same reasoning to Caller ID instruments.In an order that is likely to effect the state exchequer by about Rs. 200 crore annually for a term of three years, the bench made clear the principles and remanded the matter to the taxing authority.
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