To Levy Advertisement Fee or Advertisement Tax, No Conflict Between Power To Levy GST And Power Of Municipal Corporation: In Karnataka High Court
The Karnataka High Court said that that there is no conflict between the power to levy GST under the GST Act and the power of a municipal corporation to levy an advertisement fee or advertisement tax under Section 134 of the Karnataka Municipal Corporations Act, 1976.
In the case of Hubballi Dharwad Advertisers Association (R) vs State of Karnataka (Writ petition No. 104172 of 2021), the Karnataka High Court, a single judge bench led by Honourable Justice Suraj Govindraj, while dismissing the petition said that there is double taxation, held that both the transactions being independent and distinct, the incidence of both the GST and advertisement fee being on two distinct transactions, inasmuch as the GST not being charged by the respondent and advertisement fee not being charged by the GST authorities, though of course, there may be GST charged on the advertisement fee charged by the HDMC.
According to the facts of the case, the petitioner, Hubballi Dharwad Advertisers Association, is a registered association of advertising agencies that advertise on the advertisement hoardings licensed by the respondent, Hubballi Dharwad Mahanagara Palike. The petitioners are also said to be registered as dealers under Section 22 of the Karnataka Value Added Taxes Act, and Form 7 has been widely distributed.
The petitioners claim to be paying advertisement tax on a regular basis, despite the fact that the respondents have issued a notice requiring them to pay advertisement tax on advertisement hoardings they use.
The petitioners contended that the respondents’ authority to levy or collect advertisement tax has been revoked by the passage of the Goods and Services Tax Act. As a result, there may be no demand for advertisement tax following the passage of the GST Act.
The advertisement tax was collected by the Hubballi Dharwad Mahanagara Palike in accordance with Section 134 of the Karnataka Municipal Corporations Act, 1976. (KMC Act). The authority granted by Section 134 of the KMC Act stems from Entry 54, List II of Schedule VII of the Indian Constitution. The power has been relinquished as a result of the deletion of Entry 54. As a result, no advertisement tax could be imposed on that basis.
The petitioner claims that the respondents no longer have the jurisdiction or authority to levy or collect advertisement tax following the passage of the GST Act.
The question was whether a municipal corporation could levy an advertisement tax or fee after the GST Act went into effect.
It could not be subject to both GST and advertising tax, according to the petitioner.
If this is the case, there is double taxation, which is illegal, and upon the implementation of the GST Act, the petitioners will be subject to only GST, with no obligation to pay advertisement tax.
The petitioner stated that the petitioner is in the advertising business and is required to collect and remit GST from any of its or their clients during the course of business. The petitioners are not making GST payments out of their own pockets. The petitioners supplying services and/or goods; the invoice amount would be required to be accompanied by a GST amount based on the GST Act categorization of services and/or goods on the invoice that the petitioners were to raise on behalf of their respective clients. The GST was collected from the petitioners’ client. The amount must be remitted to the GST authorities by the petitioners.
The petitioners are simply a collection agency that collects and deposits the GST payable on the service rendered. The incidence of tax, i.e., GST, is on the services rendered or goods supplied, with the person receiving the service or receiving the goods obligated to pay.
While rejecting the petitioner’s contention that there is double taxation, the court held that because both transactions are independent and distinct, the incidence of both the GST and advertisement fee is on two distinct transactions, inasmuch as the GST is not charged by the respondent and the advertisement fee is not charged by the GST authorities, though there may be GST charged on the advertisement fee charged by the HDMC.