Local Cable Operators files petition in Kerala HC against Press release asking all cable TV subscribers to insist for GST Invoice from Cable TV Operators [Read Petition]

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A writ petition has been filed before Kerala High Court by Local Cable Operators against the Press release issued by the Director-General of Goods and Service Tax Intelligence (DGGI) asking all cable TV subscribers to insist for GST invoice from cable TV operators.

The Petitioners contended that they are Local Cable Operators (LCO) whose aggregate annual turnover does not exceed 20 Lakhs in a year and therefore not required to obtain registration under the CGST Act or the Kerala GST Act, 2017. The Petitioners argue that, by issuing such a press release, DGGI  is indirectly asking all the cable TV operators to obtain registration and pay GST, when they are not legally required to obtain registration as per CGST Act. The petitioners are of the view that the Press release had caused confusion and panic among the subscribers and left a negative impression about the cable TV operators including the Petitioners among the general public to suggest that they are raising bills without GST for the purpose of tax evasion. The confusion and panic caused among the subscribers due to the above press release has seriously affected the business operations of the Petitioners and therefore directly violates the fundamental rights guaranteed under Article 19 (1)(g) of the Constitution. 

It appears that recently an investigation was conducted by DGGI at the premises of a Multi-System Operator (MSO) in Kochi on the allegation that MSOs are paying GST only on that portion of the revenue received by them from the LCOs and it is the contention of the DGGI that the MSOs should pay GST on the entire amount billed to subscribers.    Since the subscription amounts are paid by subscribers to Local Cable TV Operators and the MSOs collect only 45% of the subscription amount from the LCOs as part of the Revenue Share settlement Agreement between them, there is an evasion of tax according to DGGI.  

The Writ Petition filed through Adv. Shameem Ahamed states “Even after the digitization, the LCOs are still the service providers providing services on its own account to the retail subscribers and as stated earlier, the entire cable network is established and maintained by them on their own and the broadcasters or the MSOs do not have any right or ownership or any control on such network operated and maintained by the LCOs.   The MSO’s role is to distribute the TV Signals up to the cable junction of the LCOs.  It is the LCOs who then distribute the TV signals to the subscriber premises and pay the Pole rent to the electricity board, charges to the Municipality, and PWD for the cable laid down by them.

The Petition further states: “Each of the LCOs including the petitioners are providing services to the retail subscribers on its own and are neither acting on behalf of the MSOs or the broadcasters or their agents.    The Petitioners submit that it is the LCOs who raises the bills or issues the receipt on the subscribers depending upon the kind of subscription made by the customers based on the data available in the Subscriber Management System (SMS).  Further, it is the LCO who does activation of the customers on the SMS, facilities/package channel selections, deactivates defaulting subscribers etc.  

The Petitioners also refers to various provisions of TRAI Interconnection Regulation and the Model Interconnection Agreement prescribed under the TRAI Regulation and contends that as per Clause 12 of the Interconnection Regulations,  no distributor of television channels shall provide signals of television channels to a local cable operator without entering into a written interconnection agreement.   Further such written agreement has to be on the lines of the Model Interconnection Agreement as provided in the Interconnection Regulations and neither the MSOs or the LCOs have the right to modify the Model agreement as given in the Regulations.  As per  Clause (E) of the Recital portion of the Model Interconnection agreement,  MSO and LCO have executed the interconnection agreement on Principal to Principal basis.   The Petitioners further refers to clause 14.2 of the Model Interconnection Agreement which states that “Nothing contained herein shall constitute either Party as the agent or partner or the representative of the other for any purpose and neither Party shall have the right or authority to assume, create or incur any liability or obligation of any kind, express or implied, in the name of or on behalf of the other Party and the relationship between the MSO and the LCO shall remain on “Principal to Principal” basis”

On Other hand, the GST Department, in its counter statement filed in the  Writ Petition has argued that the Local Cable TV operators are not authorized to raise bills on subscribers under TRAI regulations and their status is that of a mere “Collection Boy”. 

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