[92758] in North American Network Operators' Group
Re: Broadband ISPs taxed for "generating light energy"
daemon@ATHENA.MIT.EDU (Joe Loiacono)
Tue Oct 10 12:05:56 2006
In-Reply-To: <20061010142813.GA35814@hserus.net>
To: Suresh Ramasubramanian <ops.lists@gmail.com>
Cc: nanog@nanog.org, owner-nanog@merit.edu
From: Joe Loiacono <jloiacon@csc.com>
Date: Tue, 10 Oct 2006 11:36:41 -0400
Errors-To: owner-nanog@merit.edu
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Notice the date: October 10. That is the Indian equivalent of our April 1.
Joe
owner-nanog@merit.edu wrote on 10/10/2006 10:28:13 AM:
>
> .. because they provide internet over fiber optic cables, which workby
sending
> pulses of light down the cable to push packets ..
>
> http://www.hindu.com/2006/10/10/stories/2006101012450400.htm
>
> So they get slapped with tax + penalties of INR 241.8 million.
>
> ________________
>
>
> Broadband providers accused of tax evasion
>
> Special Correspondent
>
> Commercial Tax Department serves notice on Airtel
>
> # Firms accused of evading tax on sale of `light energy'
> # Loss to State exchequer estimated at Rs. 1,200 crore
>
> Bangalore: The Commercial Tax Department has served a notice on Airtel,
owned
> by Bharti Televentures Ltd., seeking payment of Rs. 24.18 crore as tax,
> interest and penalty for the sale of `light energy' to its customers for
> providing broadband through optical fibre cables (OFC).
>
> The department has been investigating alleged tax evasion by OFC
broadband
> providers, both in the public and private sectors, for selling
lightenergy to
> customers. "While the assessment on Airtel was completed and a
> notice issued to
> it for alleged tax evasion during the year 2005-06, no assessment has
been
> concluded on other OFC broadband providers," A.K. Chitaguppi, Deputy
> Commissioner of Commercial Taxes, said. Other OFC broadband providers
facing
> tax evasion charges are public sector BSNL and private sector VSNL,
Reliance,
> Tata Teleservices and Sify.
>
> The Commercial Tax Department has estimated a loss of Rs. 1,200
> crore to the State exchequer in this regard since OFC broadband
> providers have been operating in the State for several years.
>
> Mr. Chitaguppi said that OFC operates on light energy, which is
artificially
> created by the OFC providers and sold to customers for the purpose of
data
> transmission and information, on the OFC broadband line. Without such
energy,
> data or information cannot be transmitted.
>
> "Whoever sells light energy is liable to pay VAT as it comes under
> the category
> of goods, and hence its sale constitutes taxable turnover attracting VAT
at
> 12.5 per cent," he said.
>
> Bharti Televentures had approached the Karnataka High Court seeking to
quash
> the demand notice, but failed to get a stay when the case was heard by
Justice
> Shantanu Goudar on September 1. The judge rejected Bharti's plea seeking
issue
> of an injunction against any initiatives from the Commercial Tax
Department on
> the recovery of the tax.
>
> Bharti Televentures had contended in the High Court that re-assessment
orders
> passed by State tax officials and the issue of demand notice was not
valid as
> the disputed activity fell under the provision of service tax levied by
the
> Union Government and did not attract VAT. The High Court is expectedto
take up
> the case for hearing again in the next few days.
>
> `Business venture'
>
> The Commercial Tax Department has argued that the OFC broadband
operators are
> running a business venture after investing thousands of crores to put in
place
> a state-of-the-art set-up to artificially generate light energy and
supply it
> to its customers for their data transmission work. The characteristics
of the
> light energy constitute a moveable property, which has to be categorised
as
> `goods' as per the norms laid down by the Supreme Court. "In the process
of
> data transmission, other than light energy, no other elements are
involved and
> the customers are paying for the same. This proves that light energy
> constitutes goods, which is liable for levy of tax. Therefore, the State
has
> every legal competence and jurisdiction to tax it," the department has
> contended.
>
> It has taken serious note of the non-payment of taxes by the broadband
service
> providers. "Reporting a turnover and then claiming exemption is one
thing. But
> some of the OFC operators don't even report their turnovers," Mr.
Chitaguppi
> alleged.
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<br><font size=2 face="sans-serif">Notice the date: October 10. That is
the Indian equivalent of our April 1.</font>
<br>
<br><font size=2 face="sans-serif">Joe</font>
<br>
<br><font size=2><tt>owner-nanog@merit.edu wrote on 10/10/2006 10:28:13
AM:<br>
<br>
> <br>
> .. because they provide internet over fiber optic cables, which workby
sending<br>
> pulses of light down the cable to push packets ..<br>
> <br>
> http://www.hindu.com/2006/10/10/stories/2006101012450400.htm<br>
> <br>
> So they get slapped with tax + penalties of INR 241.8 million.<br>
> <br>
> ________________<br>
> <br>
> <br>
> Broadband providers accused of tax evasion<br>
> <br>
> Special Correspondent<br>
> <br>
> Commercial Tax Department serves notice on Airtel<br>
> <br>
> # Firms accused of evading tax on sale of `light energy'<br>
> # Loss to State exchequer estimated at Rs. 1,200 crore<br>
> <br>
> Bangalore: The Commercial Tax Department has served a notice on Airtel,
owned<br>
> by Bharti Televentures Ltd., seeking payment of Rs. 24.18 crore as
tax,<br>
> interest and penalty for the sale of `light energy' to its customers
for<br>
> providing broadband through optical fibre cables (OFC).<br>
> <br>
> The department has been investigating alleged tax evasion by OFC broadband<br>
> providers, both in the public and private sectors, for selling lightenergy
to<br>
> customers. "While the assessment on Airtel was completed and
a <br>
> notice issued to<br>
> it for alleged tax evasion during the year 2005-06, no assessment
has been<br>
> concluded on other OFC broadband providers," A.K. Chitaguppi,
Deputy<br>
> Commissioner of Commercial Taxes, said. Other OFC broadband providers
facing<br>
> tax evasion charges are public sector BSNL and private sector VSNL,
Reliance,<br>
> Tata Teleservices and Sify.<br>
> <br>
> The Commercial Tax Department has estimated a loss of Rs. 1,200 <br>
> crore to the State exchequer in this regard since OFC broadband <br>
> providers have been operating in the State for several years.<br>
> <br>
> Mr. Chitaguppi said that OFC operates on light energy, which is artificially<br>
> created by the OFC providers and sold to customers for the purpose
of data<br>
> transmission and information, on the OFC broadband line. Without such
energy,<br>
> data or information cannot be transmitted.<br>
> <br>
> "Whoever sells light energy is liable to pay VAT as it comes
under <br>
> the category<br>
> of goods, and hence its sale constitutes taxable turnover attracting
VAT at<br>
> 12.5 per cent," he said.<br>
> <br>
> Bharti Televentures had approached the Karnataka High Court seeking
to quash<br>
> the demand notice, but failed to get a stay when the case was heard
by Justice<br>
> Shantanu Goudar on September 1. The judge rejected Bharti's plea seeking
issue<br>
> of an injunction against any initiatives from the Commercial Tax Department
on<br>
> the recovery of the tax.<br>
> <br>
> Bharti Televentures had contended in the High Court that re-assessment
orders<br>
> passed by State tax officials and the issue of demand notice was not
valid as<br>
> the disputed activity fell under the provision of service tax levied
by the<br>
> Union Government and did not attract VAT. The High Court is expectedto
take up<br>
> the case for hearing again in the next few days.<br>
> <br>
> `Business venture'<br>
> <br>
> The Commercial Tax Department has argued that the OFC broadband operators
are<br>
> running a business venture after investing thousands of crores to
put in place<br>
> a state-of-the-art set-up to artificially generate light energy and
supply it<br>
> to its customers for their data transmission work. The characteristics
of the<br>
> light energy constitute a moveable property, which has to be categorised
as<br>
> `goods' as per the norms laid down by the Supreme Court. "In
the process of<br>
> data transmission, other than light energy, no other elements are
involved and<br>
> the customers are paying for the same. This proves that light energy<br>
> constitutes goods, which is liable for levy of tax. Therefore, the
State has<br>
> every legal competence and jurisdiction to tax it," the department
has<br>
> contended.<br>
> <br>
> It has taken serious note of the non-payment of taxes by the broadband
service<br>
> providers. "Reporting a turnover and then claiming exemption
is one thing. But<br>
> some of the OFC operators don't even report their turnovers,"
Mr. Chitaguppi<br>
> alleged.<br>
</tt></font>
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