Telcos Breathe In Relief: SIM Cards Not Goods, Cannot Be Taxed, Says Supreme Court

The Supreme Court has declared that SIM cards, recharge coupon vouchers, and value-added services such as ringtones, wallpapers, and music downloads cannot be subjected to sales tax since they do not qualify as goods.

What Happened? Upholding a 2011 ruling by the Andhra Pradesh High Court, the bench led by Justice Ravindra Bhatt stated that sales tax cannot be imposed on sharing of infrastructure since it does not come under the category of goods, a stance taken by the High Court.

An ET report stated that the Supreme Court rejected the Andhra Pradesh tax department’s argument that any intellectual property placed in any media would be classified only as ‘goods’ and never as services. The apex court also disposed of a batch of over 50 cases involving various telecom companies, including Airtel, Tata, Idea, BSNL, and Vodafone.

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The department contended that SIM cards can store data of phone calls, contact numbers, games, music, etc., and are capable of being bought and sold. They argued that SIM cards have all the attributes of “goods” and can be subjected to sales tax.

Why it Matters? The Supreme Court’s rejection of the department’s arguments indicates that the form of media does not determine the nature of the services provided.

The telecom sector can expect significant implications as a result of this ruling. The industry sees the decision as a positive step towards resolving the issue and bringing clarity. The ruling is also expected to have significant implications for the taxation of various other services in the future.

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