Earlier this month, the Supreme Court deferred the substantive judgement between Karnataka Government and Bharti Airtel telecom provider. Karnataka Government claims that Bharti Airtel is liable to pay Value-Added Tax (VAT) of Rs 25.6 crore for its broadband services.
We should be grateful for the nuance here, or else Karnataka would have even started taxing sunlight.
This is unethical for two reasons.
-Only the Centre can tax services and not State and state VAT applies only to goods and not services. A bizarre element is, Karnataka knows this.
-Karnataka claims that broadband will be treated as goods and not services, since it involves what it claims sale and transmission of 'artificially created light energy'.
The Supreme Court that has passed a verdict on the merits of the case, has asked Karnataka"s tax appellate authority to investigate. Meanwhile, Karnataka's success might persuade other state Governments to follow these unethical ways of extorting taxes.