Monday, September 26 2005 20:13 Hrs (IST) - World Time -

New Delhi: The Supreme Court today (Sept 26, 2005) restrained all the State Governments from levying sales tax and VAT running into crores from telecommunication service provider VSNL for its internet services offered throughout the country.

A Bench comprising Justice Ruma Pal and Justice AR Lakshmanan issued notices to the Center and State Governments on the petition by Tata-owned VSNL, seeking to stay the levy of sales tax/VAT on the services including internet, broadband and leased lines (both domestic and international).

VSNL contended that no such local sales tax was leviable by any state government on the provision of Internet services, and any attempted levy was completely impermissible, unconstitutional and beyond the legislative competence of the State Governments.

"And if permitted to stand (these levies) are contrary to the interest of millions of consumers across the country", VSNL said.

Claiming that the demand being raised by various states ran into crores of rupees, VSNL said in some states like Uttar Pradesh the company was being subjected to monthly assessment and as such has to file monthly appeals and pay pre-deposits for the entertainment of these appeals.

VSNL has challenged the state governments' decision to treat Internet as 'goods' for bringing it under the ambit of sales tax.