In a recent case, the Telangana High Court (HC) held that the Subsumption of service tax will not absolve liability to pay GST if service tax was agreed to be paid as per agreement and ordered that the Petitioner is liable to pay the GST on the license fee in place of service tax as the Petitioner was paying service tax separately under the terms of Deed of License.
The petitioner prayed to issue a Writ of Mandamus to declare the action of the respondents in levying GST on the licence fee payable by the petitioner in respect of the licence granted to her to carry on the business in the premises of the respondents, as being illegal, arbitrary and in violation of principles of natural justice.
Sri D.V.Chalapathi Rao, Counsel appeared on behalf of the petitioner and Sri Thoom Srinivas, Standing Counsel appeared on behalf of the respondents.
It was contended that she was granted a licence by the respondent authorities to set up a business for running a pop-corn stall at the premises of the 3rd respondent on payment of the agreed licence fee, and for the said purpose, she had entered into an agreement with the respondents, titled as ‘deed of licence’, dt.22.09.2015, under the signature of the 4th respondent.
The respondents notwithstanding the terms of the Deed of Licence granted, demanded payment of GST, w.e.f. 01.07.2017 and that the said demand made is contrary to the terms of the Deed of Licence.
Per Contra, the respondent submitted that in terms of the Deed of Licence, the licensee had agreed to pay service tax on the monthly licence fee and that the same was also collected in addition to the licence fee payable periodically from the petitioner although the period upto 01.07.2017.
Further stated that with the introduction of GST w.e.f. 01.07.2017, in place of Service Tax, the respondents-authorities have demanded payment of GST being a levy substituting the service tax and no additional or new levy is sought to be imposed on the petitioner by the respondents-authorities.
A two-member bench comprising Justice T. Vinod Kumar and Justice Pulla Karthik observed that Clause (43) of the Deed of Licence entered into between the petitioner and the respondents stated that “the license shall pay the service tax @ 14% as applicable on payment of monthly license fee every month under notification No.14/2015, dt.19.05.2015, issued by the Govt. of India.”
While dismissing the petition Court held that “since the petitioner had agreed to pay service tax in addition to the monthly licence fee fixed thereunder and the GST being a levy which has been introduced in the place of service tax, the petitioner cannot absolve herself of the liability to pay GST in place of service tax.”
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