Composite retail packs of mobile phones and chargers are taxed as one set when the handset gives the essential character.

Mobile phone chargers sold in a composite retail pack with a handset were treated as part of goods put up in sets for retail sale under the Karnataka VAT Rules. The court applied the essential character and dominant intention tests, finding that the handset gave the set its character and the charger was incidental to the sale of the mobile set. It also held that the charging and computation provisions did not permit artificial splitting of the composite pack's value. The charger was therefore taxable at the same rate as the mobile phone, rather than as a separate unscheduled item.

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Issues: Whether mobile phone chargers sold along with mobile phones in a composite retail pack are taxable at the same rate as mobile phones, or whether they can be taxed separately as unscheduled goods.

Analysis: The relevant entry under the Karnataka Value Added Tax Act, 2003 and the connected notification covered telecommunication equipment and parts thereof. The Court distinguished the Supreme Court decision dealing with the Punjab VAT Act because that entry referred only to cellular telephones and did not include accessories. It held that the composite retail pack of mobile phone and charger fell within the concept of goods put up in sets for retail sale under Rule 3(b) of the Karnataka Value Added Tax Rules, 2005. Applying the essential character test and the dominant intention test, the Court found that the mobile phone gave the set its essential character and that the charger was incidental to the sale of the mobile set. The Court also noted that the charging and computation provisions did not permit artificial splitting of the value of the composite pack.

Conclusion: The charger sold along with the mobile phone was held taxable at the same rate as the mobile phone, and not as a separate unscheduled item.

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