The Supreme Court of India has ruled that the mobile phone battery charger should be subjected to a different tax rate than the mobile phone. The court has cited that the battery charger is an accessory to the phone and not a part of it as the battery charger can be sold separately, without selling the phone. Therefore, an equal rate of taxation should not be imposed on the two items.
According to the regulations, a concessional rate of tax at 4 per cent is applied to mobile phones and its parts, while the accessories are a separate item liable to a tax rate of 12.5 per cent.
The court?s decision is with regards to a dispute involving Nokia India Private Limited, where the State of Punjab had held that the battery charger was an accessory chargeable to tax at the rate of 12.5 per cent. This had resulted in an additional payment of Rs 21.6 million and Rs 31.0 million for 2005-06 and 2006-07 respectively, after including interest and penalty on the sale of mobile phone chargers.
On the matter, Nokia had argued that since no additional charge for the charger was claimed from the customers while selling its phones and therefore, its chargers must be taxed at 4 per cent.
Prior to the Supreme Court?s verdict, the Value Added Tax Tribunal in Chandigarh had dismissed Nokia?s appeal. Nokia had then appealed in the Punjab and Haryana High Court, which had decided in favour of Nokia. The court had held that the battery charger is a part of the composite package of the mobile phone.
However, the Supreme Court has now set aside the high court?s order asserting the decision of the tribunal.
