Internet, towers installation: Punjab Revenue Authority to collect Salex Tax on rental income of telecom companies
Punjab Revenue Authority (PRA) has announced that it will collect sales tax on rental income of all the telecom companies received from internet service providers for providing space on their cell sites (towers) for installation of boosters or similar equipment for providing broadband internet services.
PRA while responding to a question raised by certain quarters whether or not the rentals received by telecom companies from internet service providers for providing space on their cell sites (towers) for installation of boosters or similar equipments for providing broadband internet services, will attract Punjab sales tax, clarified that telecom companies, who charge rental amounts, shall therefore, be required to charge, collect and pay sales tax against the tax invoices issued to the broadband service providers.
Sources in the PRA said that the Authority replying to the query in detail said under rule 106 of the Punjab Sales Tax on Services (Definitions) Rules, 2012, telecommunication services include the transfer or assignment of the right to use capacity for such transmission, emission or reception and provision of access to a global or local information network. As provided under clause (38) of Section 2 of the Punjab Sales Tax on Services Act, 2012, a service remains and continues to be a service regardless whether or not rendering thereof involves any use, supply or consumption of any goods either as essential or incidental aspect of such rendering.
Besides, when any specific service falling in a class of services is not specified by description under a separate sub-heading of a classification, it falls, depending upon its technical categorisation or sub-categorisation, either in the residual sub-classification (others) of the relevant sub-heading or in the last (grand) residual sub-classification of the main classification.
The service of renting any space on towers by the telecom companies for installation of boosters will be classified accordingly and will, attract sales tax in terms of rule 25 of the Punjab Sales Tax on Services (Specific Provisions) Rules, 2012. Moreover, under clause (b) of Section 6 (1) of the Punjab Sales Tax on Services Act, 2012, supply of moveable property by way of lease, license or similar arrangement is covered under the concept of economic activity and any transaction of supplying anything other than goods during the course of economic activity is service.
Mere renting out of any space on towers owned by telecom companies, even though used for installation of boosters meant for providing broadband internet services (which are currently exempt from Punjab sales tax) does not entitle such telecom-related renting service to any exemption from Punjab sales tax whether with reference to broadband internet services or otherwise.
The telecom companies, who charge rental amounts, shall therefore, be required to charge, collect and pay sales tax against the tax invoices issued to the broadband service providers. The principle that unless zero rated, exempt supplies/services by and large remain input tax-paid has a universal application under VAT or VAT-type taxation, the Authority added.