2026 (2) TMI 1000 - HC - VAT / Sales Tax

Dominant Character Test finds SIM issuance and activation charges constitute service consideration and are not VAT-liable.

Issuance and allotment of SIM cards and attendant activation or replacement charges were analysed under precedents treating SIMs as having no intrinsic ... SIM Cards are not goods but part of taxable service - Activation/processing charges include value of SIM Card - Dominant character of transaction determines taxability (service v. sale) - Whether the SIM Card which is showed by the petitioner establishment would be leviable to tax under the provisions of the VAT Act. - HELD THAT:- The said issue, no longer is res integra as it has been in very categorical terms held by the Hon’ble Supreme Court in the case of Idea Mobile Communication Ltd. v. Commissioner of Central Excise and Customs [2011 (8) TMI 3 - SUPREME COURT] The aforesaid judgment clearly lays down the issue that the issuance of SIM Cards would therefore be not amenable to sales tax as it does not amount to sale of good but only amounts to providing services. The same view earlier was also reiterated by the Hon’ble Supreme Court in the case of Bharat Sanchar Nigam Limited v. State of Andhra Pradesh [2006 (3) TMI 1 - SUPREME COURT] which has been further followed by the Unified High Court of Andhra Pradesh (DB) [2011 (9) TMI 216 - ANDHRA PRADESH HIGH COURT] This Bench also had an occasion of taking up one similar writ petition i.e., W.P., which stood decided [2024 (1) TMI 1530 - TELANGANA HIGH COURT] wherein the aforesaid judgments were taken note of and in the light of the aforesaid judgments, we had allowed the writ petition holding that the allotment of SIM Cards to the subscribers would not attract sales tax under the VAT Act. In view of the aforesaid legal precedents of the Hon’ble Supreme Court as also of this High Court, the facts in the instant case also being of similar nature, we do not find any good reason why the instant writ petition also should not be allowed in similar terms. Accordingly, we allow the writ petition setting aside the impugned order holding that SIM Cards are not be leviable to tax under the provisions of the VAT Act. Issues: Whether issuance/allotment of SIM cards and related activation / replacement charges are leviable to tax under the VAT Act.Analysis: The issue was examined in light of binding precedents which hold that SIM cards have no intrinsic sale value and are supplied as an integral part of providing telecommunication services. Relevant authorities establish that charges collected for SIM cards or activation are processing/activation charges forming part of the consideration for a taxable service, and that the dominant character of the transaction is provision of service rather than sale of goods. The position in earlier decisions interpreting Article 366(12) of the Constitution of India and provisions of the A.P. VAT Act, 2005 (including Section 4(1) and Section 4(8)) was considered and applied to the facts of the petition, concluding that SIM cards and activation/replacement charges are not amenable to sales tax under the VAT Act but fall within service taxation.Conclusion: Issuance/allotment of SIM cards and related activation/replacement charges are not leviable to tax under the VAT Act; the reassessment/order imposing VAT on such charges is set aside.