2021 (8) TMI 387 - Commissioner - GST

Telecom License Fees and Spectrum Charges Taxable under GST Law

The court held that payment of License Fee (LF) and Spectrum Usage Charges (SUC) to the Department of Telecommunications constitutes a taxable 'Supply' ... Refund of of Tax paid inadvertently to the government exchequer - Section 54 of CGST Act, 2017 - Whether payment, in the form of License Fee (LF) for issuance of License and Spectrum Usage Charges (SUC) for use of spectrum, as a percentage of the ‘Adjusted Gross Revenue’ (AGR) to ‘Department of Telecommunications’ (DoT) is a ‘Supply’ under GST law or not? Whether issuance of license and allotment of spectrum as a ‘Regulatory fee’ attract any levy of tax as per GST law or not? - HELD THAT:- The rendering of service from the Government (DoT) to business entities, (in the instant case ’the appellant’) established from the aforesaid statutory provision. Therefore, the levy of GST is appropriately applicable on the appellant as per sub-section (3) of Section 9 of the CGST Act, 2017 read with Notification No. 13/2017-Central Tax (Rate), dated 28 June, 2017 - if there was any doubt regarding ‘taxability of service’ then the appellant was free to approach the Authority for Advance Ruling (AAR) as per clause (e) of sub-section (2) of Section 97 of CGST Act, 2017, because question of law about determination of the liability to pay tax on any service may be sought for advance ruling to AAR as per GST law, but the same was not opted by the appellant. Whether LF and SUC charges are ‘consideration’ for supply as per GST law or not? - HELD THAT:- The permission of granting of License by DoT and allotment of spectrum on the basis of SUC for business activities is directly nexed with their revenue, hence, it cannot be held that these charges are regulatory fee - Further, as per Section 4 of the Telegraph Act “The Government merely grants/delegates permission of carrying out the establishing, maintaining and working telegraphs”. Granting permission for carry out the establishing, maintaining and working telegraphs and allocation of spectrum is a service which falls under HSN Head 997338 which specifically defines “Licensing services for right to use other natural resources including telecommunication spectrum” - If no GST is leviable on grant of license then why a service category at HSN Head 997338 as “Licensing services for right to use other natural resources including telecommunication spectrum” has been specified in the GST Act. Thus, it can be concluded that such type of services ‘License Services for right to use other natural resources including Teleservices Spectrum’ are not regulatory fee and are taxable as per GST law under the specific Head 997338 meant for such services. The consideration in the form of LF and SUC paid by the appellant to the government is ‘consideration’ as per clause (31) of Section 2 of CGST Act, 2017 which cover all the elements specified under ibid section of the Act. There are service provider as well as service recipient and the element of consideration is also involved in the instant case. Hence, the taxability is fasten on these payments as per GST Act. Whether impugned order is non-speaking order? - HELD THAT:- The fact to be appreciated is that the rate amendments carried out vide Notification No. 27/2018-Central Tax (Rate), dated 31-12-2018 is nothing but to clarify the legislative intent as well as to resolve the unintended interpretations. Hence, the rate of tax specified vide Notification No. 27/2018-Central Tax (Rate), dated 31-12-2018 is very much applicable to the disputed period and as such the prevalent rate, at which appellant has paid, found in order. Whether License fee and Spectrum usage charges paid by the Appellant are covered in Service Rate Notification and are leviable to tax or not? - HELD THAT:- “Licensing services for right to use other natural resources including telecommunication spectrum” is specified in HSN sub-heading 997338, whereby taxability of said service has been fastened as per Notification No. 11/2017-Central Tax (Rate), dated 28-6-2017. Since, taxability of service in question has been specified in the Act, then it cannot be interpreted that it will not be taxed and refund will be issued for the GST payment in this regard. Further, all the submissions/averment of the appellant have been taken up for discussion in the instant appeal case. Therefore, there are no any merit of the appellant in this context. Appeal dismissed. Issues Involved:1. Whether payment, in the form of License Fee (LF) for issuance of License and Spectrum Usage Charges (SUC) for use of spectrum, as a percentage of the ‘Adjusted Gross Revenue’ (AGR) to ‘Department of Telecommunications’ (DoT) is a ‘Supply’ under GST law or notRs.2. Whether issuance of license and allotment of spectrum as a ‘Regulatory fee’ attract any levy of tax as per GST law or notRs.3. Whether LF and SUC charges are ‘consideration’ for supply as per GST law or notRs.4. Whether License fee and Spectrum usage charges paid by the Appellant are covered in Service Rate Notification and are leviable to tax or notRs.5. Whether the impugned order is a non-speaking orderRs.Detailed Analysis:Issue (a): Whether payment, in the form of License Fee (LF) for issuance of License and Spectrum Usage Charges (SUC) for use of spectrum, as a percentage of the ‘Adjusted Gross Revenue’ (AGR) to ‘Department of Telecommunications’ (DoT) is a ‘Supply’ under GST law or notRs.The judgment establishes that under Section 2(83) and Section 7 of the CGST Act, 2017, the term 'license' is explicitly covered, making it a 'Supply.' The adjudicating authority referred to Entry No. 62 of Notification No. 25/2012-S.T., which made services provided by the Government taxable when allowing a business entity to operate as a telecom service provider or use radiofrequency spectrum on payment of license fee or spectrum user charges. The term 'license' as per the Cambridge dictionary means 'to give someone official permission to do something.' The judgment concluded that granting permission to establish, maintain, and work telegraphs and allocation of spectrum is a service falling under HSN Head 997338. Therefore, it was construed as a supply of service in furtherance of the appellant's business, making it taxable under GST law.Issue (b): Whether issuance of license and allotment of spectrum as a ‘Regulatory fee’ attract any levy of tax as per GST law or notRs.The judgment clarifies that the LF and SUC, being a percentage share of revenue (AGR) and fluctuating charges, cannot be considered regulatory fees. The permission granted by DoT for business activities is directly linked to revenue, thus not a regulatory fee. The service falls under HSN Head 997338, which defines 'Licensing services for right to use other natural resources including telecommunication spectrum.' Therefore, these services are taxable under GST law.Issue (c): Whether LF and SUC charges are ‘consideration’ for supply as per GST law or notRs.The judgment refers to clause (31) of Section 2 of CGST Act, which defines consideration. It establishes that the payments made for the grant of a license under Section 4 of the Indian Telegraph Act, 1885, include such sums attributable to the Universal Service Obligation. The LF and SUC are payments made in respect of the supply of services, thus meeting the definition of consideration. The judgment concludes that there are service providers and recipients, and the element of consideration is involved, making these payments taxable under the GST Act.Issue (d): Whether License fee and Spectrum usage charges paid by the Appellant are covered in Service Rate Notification and are leviable to tax or notRs.The judgment finds that the appellant paid GST under HSN Head 9973, which is appropriate for 'Leasing or rental services with or without operator.' The rate of GST is defined at S. No. 17 against clause (vi) in Notification No. 11/2017-Central Tax (Rate). The service is classified under SAC 997338, 'Licensing services for right to use other natural resources including telecommunication spectrum.' The judgment also references Notification No. 27/2018-Central Tax (Rate), which clarified the legislative intent and resolved unintended interpretations. It concludes that the rate of tax specified in this notification is applicable to the disputed period, and the appellant's payment is found in order.Issue (e): Whether the impugned order is a non-speaking orderRs.The judgment agrees that the impugned order is a non-speaking order but emphasizes that the taxability of 'Licensing services for right to use other natural resources including telecommunication spectrum' is specified in HSN sub-heading 997338. Since the taxability of the service is specified in the Act, it cannot be interpreted that it will not be taxed, and the refund will be issued for the GST payment. The judgment finds no merit in the appellant's contention regarding the non-speaking nature of the order.Conclusion:The judgment concludes that there is no infirmity in the rejection of the refund claims. All three appeals filed by the appellant are rejected, and the judgment is disposed of accordingly.