The only circumstance in which SIM cards could attract sales tax, that is, treated as goods is when they are sold separately, with their buyers being called upon to pay for talk time separately.
This would be the case when cards are sold at convenience shops such as sundry pharmacists, electric repair shop and so on, for say Rs 25 or Rs 50 on which sales tax would have to be paid.
All subsequent amounts paid with respect to the cards thus sold would be towards services, and hence, liable to service tax.
And when the cards are issued along with talk time without being charged for separately, there would be no scope for sales tax as the issue of card is integral to services.
Thus, when a service provider charges Rs 100 on issuance of a SIM card with Rs 50 talk time thrown in, the entire amount of Rs 100 would be liable to service tax. The Idea judgment has thus cleared the air and held a SIM card for it is — part and parcel of services except in cases where it is sold and priced separately.
SOURCE:https://www.thehindubusinessline.com/industry-and-economy/article2790703.ece?homepage=true&ref=wl_home
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