CMDA efforts resolve VAT tussle

Anjali Choudhary New Delhi, Sep 22

Clarifying VAT misgivings over ink and toner cartridges, Delhi Tribunal
court, in its landmark judgment, declared that ink and toner cartridges are
accessories and should thus attract only four percent VAT, not 12.5 percent as
asserted by the VAT Commissioner in earlier court pleadings. The court clearly
stated in its verdict that ink and toner cartridges were classified under third
schedule of Delhi VAT, under entry 41A(XXV) and should therefore be levied VAT
at four percent.

It may be recalled that this matter of whether cartridges fall under the
category of accessories (scheduled goods) or essential parts (unscheduled good)
of a printer was taken up for hearing by Delhi High Court in response to the
writ petition filed by CMDA (Computer Media Dealers Association) last year when
the court nullified the order passed by RK Verma, VAT Commissioner, Delhi,
stating that printer cartridges attract value added tax of 12.5 percent.
Subsequently, the VAT Commissioner was asked by the court to pass a new order
taking into consideration related articles of the VAT schedule. Preceding this,
the VAT commissioner was of the view that cartridges are unscheduled goods
covered by section 4(1)(e) and should be levied

12.5 percent tax under the Delhi VAT Act.

Thereafter, the High Court directed the matter to Tribunal Court for further
hearing in which petitioners wanted determination about the taxation structure
on cartridges. CMDA took up the matter when Ranvir Sahi of Symphony Enterprises
approached the association wanting assistance in the matter. He was guided by
the VAT Commissioner that 12.5 percent VAT should be paid on cartridges
reversing his own earlier interpretation that consumables attract four percent
tax.

Jubilant with the association's efforts in resolving the VAT issue, Puneet
Singhal, President, CMDA said, “We are extremely glad that the courts verdict
has come in our favor which is a big respite for the channel community. We
supported Sahi completely when he came to us for involvement in his quest to
resolve the matter with the respective authority, despite the fact that he was
not a member of CMDA. The courts judgment in this particular matter has
strengthened the government's stance on giving special importance to IT trade
and traders.”

According to Balram Sanghal, CMDA's counsel in the matter, the courts
decree has come at a very crucial time, enabling channel partners to heave a
sigh of relief. He said, “In this particular case everything was based on
facts and it was the VAT Commissioner who had to re-evaluate his stance. I am
happy that I have been able to discharge my duties to my clients efficiently and
fruitfully.”

Three separate applicants namely-Symphony Enterprises, CMDA and Hewlett
Packard-had filed applications under section 76 of the Delhi Value Added Tax
Act, to clarify their beliefs on taxability of cartridges. However, the
respondent (in this case VAT Commissioner) was resolute on his stand that there
is a very thin line between whether cartridges should be treated as a part or an
accessory of a printer and therefore should be levied VAT at 12.5 percent.