2022 (5) TMI 401 - HC - GST

Municipal corporations retain power to levy advertisement tax despite GST implementation, petition dismissed

Hubballi Dharwad Advertisers Association (R), M/s. Poornima Arts, M/s. Colour Point Ads C/O Mohan's Digi Print, M/s. The Prism, M/s. Thirumala Advertising Service, Arihant Ads Versus State Of Karnataka Department Of Revenue, Hubli Dharwad Mahanagara Palike, The Deputy Commisioner Revenue, Hubli

The Karnataka HC dismissed a petition challenging municipal advertisement tax demands post-GST Act enactment. Petitioners contended that GST Act ousted ... Demand of advertisement tax post the enactment of the GST Act - power of Municipal Corporation to levy advertisement tax/fee - case of petitioners is that on the enactment of the Goods and Service Tax Act (GST Act), the authority of the respondents to either levy or collect advertisement tax is ousted - HELD THAT:- In the present case, there is no challenge either to Section 134 of the Karnataka Municipal Corporations Act nor is there a challenge made to GST Act. The only reliefs which have been sought for are for setting aside the impugned demand notice at Annexure-A and a writ of prohibition directing the respondents not to meddle with the advertisement display and the hoardings of the petitioners. Petition dismissed. Issues Involved:1. Whether on the coming into force of the GST Act, a Municipal Corporation can levy advertisement tax/fee.2. Validity of the impugned demand notice issued by the respondents.3. Jurisdiction and authority of the respondents to levy or collect advertisement tax post-GST Act enactment.4. Allegation of double taxation due to simultaneous levy of GST and advertisement tax.5. Interpretation of Section 134 of the Karnataka Municipal Corporations Act in the context of GST.Detailed Analysis:1. Whether on the coming into force of the GST Act, a Municipal Corporation can levy advertisement tax/fee:The court examined the introduction of the GST Act pursuant to the 101st amendment to the Constitution, which introduced Article 246(A). GST was intended to simplify the process of collecting indirect taxes by subsuming taxes like excise duty, sales tax, and service tax into GST. The court noted that GST is levied on the supply of services and/or goods. The argument presented by the petitioners was that post-GST, only GST should be applicable, and no advertisement tax should be levied, as it would amount to double taxation. However, the court concluded that the GST and advertisement tax are levied on two distinct transactions. GST is collected on the supply of services or goods by the petitioners to their clients, while the advertisement tax is charged by the Municipal Corporation for the permission or license to put up hoardings. Therefore, both taxes are independent and do not amount to double taxation.2. Validity of the impugned demand notice issued by the respondents:The petitioners sought to set aside the impugned demand notice dated 13.06.2018, arguing that the respondents had no authority to levy advertisement tax post-GST enactment. The court found that the demand notice was valid as the Municipal Corporation retains the authority to levy advertisement tax under Section 134 of the Karnataka Municipal Corporations Act. The court dismissed the contention that the respondents lacked jurisdiction, thereby upholding the validity of the impugned demand notice.3. Jurisdiction and authority of the respondents to levy or collect advertisement tax post-GST Act enactment:The petitioners argued that the respondents' authority to levy advertisement tax was ousted by the enactment of the GST Act. However, the court referenced the Gujarat High Court's decision, which clarified that the power to impose advertisement tax is conferred on the municipality under Articles 243-X and 243-XF of the Constitution. These articles authorize municipalities to levy, collect, and appropriate taxes, duties, tolls, and fees. The court concluded that the respondents have the jurisdiction and authority to levy advertisement tax despite the enactment of the GST Act.4. Allegation of double taxation due to simultaneous levy of GST and advertisement tax:The petitioners contended that being subjected to both GST and advertisement tax amounted to double taxation, which is impermissible. The court rejected this argument, explaining that the two taxes are levied on different transactions. GST is collected on the supply of services or goods by the petitioners to their clients, whereas advertisement tax is charged for the permission to put up hoardings. Since the taxes are levied on distinct transactions, there is no double taxation.5. Interpretation of Section 134 of the Karnataka Municipal Corporations Act in the context of GST:The court examined Section 134 of the Karnataka Municipal Corporations Act, which allows the Municipal Corporation to levy a tax on advertisements. The court noted that this provision was not challenged by the petitioners. The court also referenced the Gujarat High Court's interpretation, which characterized the charges levied by the Municipal Corporation as more of a fee than a tax, due to the quid pro quo nature of the permission to put up advertisements. The court upheld the validity of Section 134 and concluded that there is no conflict between the power to levy GST under the GST Act and the power of the Municipal Corporation to levy advertisement tax.Conclusion:The writ petition was dismissed. The court declared that there is no conflict between the power to levy GST under the GST Act and the power of the Municipal Corporation to levy advertisement tax under Section 134 of the Karnataka Municipal Corporations Act. The impugned demand notice was upheld, and the authority of the respondents to levy advertisement tax post-GST enactment was affirmed.