An Analysis On Conflict Between Advertisement Tax & GST
The Karnataka High Court in one of their recent judgement in matter of Hubballi Dharwad Advertisers Association (R) v. State of Karnataka [1](2022 (5) TMI 401) gave a verdict which states that “there is no conflict between the power to levy GST under GST laws and the power of Municipal Corporation to levy Advertisement Tax under Section 134 of the Karnataka Municipal Corporations Act, 1976 (‘KMC Act’, for brevity).”
The main issue that this particular article is related to the judgement of the case law. The issue that is being discussed hear is about the conflict between the advertisement tax and the Good Service Tax and whether the implementation of both taxes lead to the problem of Double taxation.
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GST & ADVERTISEMENT TAX
The GST (Good Service Tax) is a centralised tax that is levied on any supply of goods or services. The Goods and Services Tax replaced all previous indirect taxes levied on the production, sale, and consumption of goods and services throughout the country. The implementation of GST lead to abolishment of various types of indirect taxes and one such tax is the advertisement tax. It is important to note that before the implementation of GST the advertisement tax was an important form of tax that was under the state list in most situations the right of collection of this advertisement tax was under the Municipal corporation and most of these corporations in there legislations had provisions for it.
Later after the implementation of GST after the 101 Amendment this was included in the GST the government through the amendment omitted the entry 55 of the List II of the VII Schedule of the constitution. The entry 55 dealt of the advertisement tax which mentions that “Taxes on advertisements other than advertisements published in the newspapers and advertisements broadcast by radio or television”[2]. On 12/09/2016 though the amendment this entry was omitted by the constitution of India thus revoking the power from the municipal corporations to levy a tax on advertisement.
Later this was upheld by various High Courts in various judicial pronouncements such as (.) Selvel Media Services Private Limited and Others v. State of U.P[3] (.) Pankaj Advertising v. The State of U.P[4] and (.)DM Advertisers Agency v. State of U.P.[5] Recently this issue was again into picture due to a sensational Karnataka High court verdict as the court in this verdict have completely ignored the entire above stated argument and also declared there is “no conflict between the power to levy GST under GST laws and the power of Municipal Corporation to levy Advertisement Tax”.
CONTENTION OF PETITIONERS & RESPONDENTS
The argument that the petitioner of the said case that is the Advertisement agency have stated is that (i) The power of the respondents to collect the advertisement tax have been restricted by the government when the 101 Amendment was enforced as the said amendment have removed the power of Municipal corporations to levy Advertisement tax by omitting entry 55 from the state list thus making the process Void ab initio. (ii) The next ground was mainly on the argument that the petitioners contented that this process are making them victims of the double taxations.
The petitioners have also cited various judicial precedence where the court have stated that the act of collecting the Advertisement Tax by the Municipal Corporation is Ultra vires as the said power has been given to the GST. They have also relied on the Selvel Media Services Private Limited and Others v. State of U.P which is also in similar line of the facts and the verdict of the case was supportive of the petitioners and was also in similar line with the above stated argument.
The respondents was also relied on the landmark case of Selvel Media Services Private Limited and Others v. The Municipal Corporation[6] by Gujarat High Court where the court reported in a way that was against petitioners and supported the act of the Municipal Corporation the court in the said case retreated that “The Advertisement Tax is not much of a tax and more of a fee for the Municipal Body to carry out its regulatory commitments and enforcements of by-laws, like sending officers to inspect safety and upkeep of hoardings, renewing of licenses, etc.”
ANNALYSIS
The current issue that is the conflict between the advertisement tax and GST was initially brought in three High Court through various cases after the implementation of GST. The verdict of each High court in itself is contradicting as the decision of UP high court considered this act as Ultra Vice and Karnataka and Gujarat high court have unheeded this act.
The major issue that comes up with this contradiction is that none of the High Court have given a clear cut answer on the main question of states power to collect an advertisement tax as the legal source that gave this power i.e. the Entry 55 of the State list itself have been deleted. This lead to a major lacuna and confusion in this particular area of legal taxation.
The another major issue that is coupled along with the above stated problem is that the GST (Compensation to States) Act, 2017 the act was created for the purpose of providing compensations to the states on any kinds of revenue loss that has been faced by the due to the implementation of the GST under the 101 Amendment. The sec 5(1)(e) of the act mentions of the advertisement tax that was earlier mentioned and was allotted in the state list. As the said amount of tax was earlier present in the entry 55 of the state list and thus making it very much clear that the states are being compensated and thus there are not liable to make the public pay tax on this idea and thus excessing the taxing powers of the state over this compensation is also a violation of the law of the land.
It is also clear that once they have been mentioned in the compensation act it is very much clear and evident that there power to collect tax on this ground is revoked thus any act of state taking tax on this matter is also a violation.
It is also to be noted that after the implementation of the GST and the removal of the entry from the state list most of the states have included there advertisement tax into the GST except 7 states which includes Chhattisgarh, Gujarath, Karnataka, Himachal Pradesh, Mizoram, Nagaland, West Bengal. This act of these states can be considered as a major issue as this itself is defeating the major idea behind the implementation of the GST into the country that is the One nation one tax policy thus making it as a major question of law.
CONCLUSION
The issue that have been dealt in this particular article has its own merit and importance as other than most of the Tax and GST related issues the current one the judiciary itself have given contradicting verdicts that makes the situation much more worse. The state governments also did not realise a concrete decision on this matter thus making it in a full confusion state. The High court also did not clearly mentions about the power of the states to collect Advertisement Tax even after the entry 55 is being removed from the State list thus making the situations worse. Thus considering all the above states arguments and contention into account it can be easily understood that the issue has its own prominence and must be dealt by either the GST council of the Supreme Court passing a verdict to remove the current confusion on this area. The government should also pass an order on the clarity of the entry 55 and the power of state government to collect the Advertisement Tax thus solving the current crisis.
Author: Nithin Manoj – a student of School of law, Christ, in case of any queries please contact/write back to us at support@ipandlegalfilings.com or IP & Legal Filing.
References:
[1] Writ Petition No. 104172 OF 2021 (LB-TAX)
[2] Entry No. 55 of the List II of VII Schedule Constitution of India
[3] Writ Tax No.-354 of 2018
[4] Writ Tax No.- 577 of 2018
[5] 2019 (2) TMI 1340
[6] Special Civil Application No. 8408 of 2009
