No conflict between power to levy GST and power of Municipal Corporation to levy Advertisement Fee or Advertisement Tax: Karnataka HC

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The Karnataka High Court bench of Justice Suraj Govindraj held 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.

The petitioner, Hubballi Dharwad Advertisers Association, is a registered association of advertising agencies who are in the business of advertising on the advertisement hoardings licenced by the respondent, Hubballi Dharwad Mahanagara Palike. The petitioners are also stated to be registered as dealers under Section 22 of the Karnataka Value Added Taxes Act, having received wide circulation in Form 7.

The petitioners claim to be making regular payments of advertisement tax despite the fact that the respondents have issued a notice calling upon the petitioners to make payment of advertisement tax as regards to advertisement hoardings used by them.

The petitioners contended that with the enactment of the Goods and Service Tax Act, the authority of the respondents to either levy or collect advertisement tax is ousted. Therefore, there could be no demand for advertisement tax post the enactment of the GST Act.

The Hubballi Dharwad Mahanagara Palike has collected the advertisement tax in terms of Section 134 of the Karnataka Municipal Corporations Act, 1976 (KMC Act). The power under Section 134 of the KMC Act flows from Entry 54, List II of Schedule VII of the Constitution of India. Entry 54, having been deleted, the power is divested. Hence, even on that ground, no advertisement tax could be levied.

The petitioner has contended that the respondents do not have any jurisdiction or authority to levy or collect advertisement tax after the enactment of the GST Act.

The issue raised was whether, on the coming into force of the GST Act, a municipal corporation can levy an advertisement tax or fee.

The petitioner argued that it could not be subject to both GST and advertising tax.If so, there is double taxation which is impermissible and on the coming into force of the GST Act, it is only GST which is applicable to the petitioners and no advertisement tax is liable to be paid.

The petitioner stated that the petitioner is in the advertising business and is required to collect GST from any of its or their clients and remit it to the authorities during the course of the business. It is not that the petitioners are 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 categorization of services and/or goods under the GST Act on the invoice that the petitioners were to raise on behalf of their respective clients. The said GST was collected from the client of the petitioners. The amount is required to be remitted by the petitioners to the GST authorities.

The petitioners are only a collecting agency who collects the GST payable on the service rendered and deposits the same with the authorities. The incidence of tax, i.e., GST being on the services rendered or goods supplied, the obligation of payment being on the person availing the service and or receiving the goods.

The court, while refusing to accept the submission of the petitioner 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.

Case Title: Hubballi Dharwad Advertisers Association (R) Vs State of Karnataka

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