Charger Sold Along With Mobile Phone Can’t Be Differently Taxed: Karnataka High Court
The Karnataka High Court has held that the charger, which is sold along with the mobile phone in one set, is taxable at the rate of 5%.The division bench of Justice P.S. Dinesh Kumar and Justice T.G. Shivashankare Gowda has observed that the main intention of a purchaser or seller while buying or selling a "mobile set" is to buy or sell the mobile phone and not the charger alone. The supply...
The Karnataka High Court has held that the charger, which is sold along with the mobile phone in one set, is taxable at the rate of 5%.
The division bench of Justice P.S. Dinesh Kumar and Justice T.G. Shivashankare Gowda has observed that the main intention of a purchaser or seller while buying or selling a "mobile set" is to buy or sell the mobile phone and not the charger alone. The supply of chargers, headsets, and ejection pins is incidental to the sale. Therefore, the dominant intention test would apply, and hence, the charger cannot be differently taxed.
The respondents/assessees are registered dealers under the Karnataka Value Added Tax Act, 2003. The respondents are engaged in trading mobile phones, parts, and accessories. It sells mobile phones in a composite package that also contains accessories such as headsets, cables, an ejection pin, an adapter, a charger, a manual, etc.
The AO passed an order under Section 39(1) of the KVAT Act subjecting the sales turnover of mobile chargers to tax at a rate of 13.5% to 14.5%. The assessee filed an application for rectification, and the AO passed orders under Section 69 of the KVAT Act, rectifying the order by dropping the estimated turnover as per the return and books of accounts.
The JCCT (A) dismissed the assessee's appeal. The Tribunal allowed the appeal of the assessee and held that a charger sold along with a mobile phone in a composite pack attracts the same tax as that of a mobile phone.
The department contended that the mobile charger is not an integral part of the mobile phone and should not be treated as composite goods. Merely making a composite package of a cell phone and charger shall not make it eligible as one of the composite goods for the purpose of interpretation of the provisions. Chargers, though sold with mobile phones, are independent gadgets and therefore cannot be taxed at the same rate as a mobile phone.
The assessees contended that the sale of mobile phones along with their chargers in a single retail package constitutes a composite contract.
The court held that the mobile phone finds its place in Schedule III and is taxable at 5%, and therefore, the charger, which is also sold along with the mobile phone in ‘one set," is also chargeable at 5%.
Case Title: The State of Karnataka Versus The Index Technologies India Ltd.
Case No: STRP No. 8 Of 2022
Citation: 2023 LiveLaw (Kar) 93
Date: 10.02.2023
Counsel For Petitioner: Jeevan J. Neeralgi
Counsel For Respondent: S. Ganesh