Service Tax on Cellular Telephone services - Service Tax - 22/02/97

Service Tax on Cellular Telephone services Service Tax Circular No. 22/2/97 Dated 3-9-1997 Presently two consortiums are formed by two set of cellular operators to provide plastic or SIM card roaming to the subscribers. Under plastics roaming, a subscriber is provided with a single SIM card with a 10 digit number. While last 5 digits of the number remains same in other circles, first five digits change according to area code. 2. A doubt has been expressed by the field formation as to whether the operator (Home Operator) with whom the customer have subscribed or the operator (Service Operator) where the customers is visiting will be liable to pay the Service Tax in cases of plastic roaming facility introduce by cellular phone companies. 3. Attention of trade is invited that the Cellular Telephone services come under the definition of Telegraph authority as defined under sub-section 42 of Section 65 of the Finance Act, 1994 (referred to as Service Tax Act) read with Service Tax Cir. No. 7/1/96, dated 29-2-1996 . As per sub-section 41 to Section 65, taxable service means any service provided to a subscriber by the telegraph authority in relation to a telephone connection. For the purpose of collecting service tax, there should be a flow of service from the telegraph authority to the subscriber of the telegraph authority. In other words, the service tax should be collected from the subscriber by the cellular telephone company with whom the subscriber is registered and hence that cellular telephone company becomes the persons responsible for collecting service tax. The value of taxable services in relation to the cell phone connection provided to a subscriber is the gross total amount received by the cell phone company from the subscriber. Therefore, the cell phone company with whom the subscriber is registered should collect the tax from the subscriber irrespective of the adjustment or sharing of the bills with other companies whose services are utilized by the subscriber while roaming. 4. In view of the above it is clear that in case of plastic roaming facility, the home operator (home network), i.e., where the subscriber belongs to and who arranges roaming facility in other metro cities through the arrangements with the service operators (visiting network) should collect and pay the service tax. 5. The Commissioner of Central Excise may require the cellular telephone company (Home Network) to produce before the assessing officer the bills raised by the service operators on him for the purpose of reconciliation. 6. A trade notice may be issued suitably.