The Hindu       14.01.2011

Even post offices must pay service tax, BBMP tells court

The Bruhat Bangalore Mahanagara Palike (BBMP) on Thursday submitted to the Karnataka High Court that Central Government establishments, institutions, undertaking and offices were exempt from paying only property tax and not service tax.

The BBMP said it was not charging or levying property tax on any Central Government undertaking or office. “However, we are levying and collecting service tax on the services we render,” the BBMP said.

The BBMP made these submissions when a Division Bench comprising Justice V.G. Sabhahit and Justice B. Manohar was hearing an appeal by the civic body against a single judge order of September 2010. The judge had set aside the BBMP action in levying service tax on the Department of Posts, Mahalakshmipuram, Bangalore.

The single judge had held that post office, as per the definition of the Bangalore Development Authority (BDA) Act, 1976, was a civic amenity and that no tax or charge may be imposed on it by the State Government or its agencies.

The BBMP, in its appeal, said it had issued a notice on April 12, 2005 to the Department of Posts, asking it to pay 25 per cent of the property tax as service charge. The Department of Posts, it said, had challenged the notification saying the service charge was nothing but tax and that all Central installations were exempt from paying it.

The BBMP argued saying that it was not levying tax but charging for services it rendered such as supplying water, providing roads and drains and removing debris and garbage.

It said even the Karnataka Municipal Act had been amended providing for charging of service tax. It urged the Bench to quash the single judge order.

The Bench admitted the appeal and adjourned further hearing of the case.