MSOs did not ‘sell’ Set Top Box, they leased it out to subscriber

In a submission to Sales Tax Department, one of the MSOs made it clear
Some days back, MSOs themselves had submitted a ‘price list’ for various models of STB to district administration 

By Dheeraj Fartode 

If you have got Set Top Box (STB) installed at your home/establishment, and are assuming that you own the device, you are wrong! According to Multi Service Operators (MSO), they are actually ‘leasing out’ the device to cable television subscribers and ownership of Set Top Box shall remain vested in MSO only!
In a statement submitted to Sales Tax Department, one of the four MSOs in Nagpur city stated that STBs were being installed ‘on lease’ and ownership would remain with MSOs concerned. As per the statement, charges collected from subscribers are merely ‘activation and installation charges’ and not the price for STB.
One may obviously ask, why are MSOs doing this? As per the norms, MSOs shall have to pay 12.5 per cent Value Added Tax (VAT) if they show that STBs have been sold. However, VAT does not apply to activation and installation charges. This is also the reason behind MSOs not giving receipt when a subscriber installs STB. In the process, they are evading VAT though they are collecting ‘charges’ from subscribers.
The district administration’s records show that around four lakh Set Top Boxes have been installed in the city by MSOs including UCN, BCN, GTPL and InCable. The administration had issued a press release also in which ‘prices’ of STB were mentioned for different models and different MSOs. Additional Collector Asha Pathan had told reporters that the ‘prices of STBs’  were based on information furnished by MSOs. If MSOs had furnished ‘price list’ for various models of STBs to the administration, how come they are informing Sales Tax Department that they are ‘not selling’ STBs? The use of the word ‘price’ implies sale. The MSOs had not mentioned the money they were collecting from subscribers as ‘activation and installation charges’, in their submission to the district administration.
Meanwhile, on Thursday, Sales Tax Department paid a visit to office of UCN. The MSO authorities told the officials that they had purchased consignment of Set Top Boxes from CISCO company and it was ‘high-sea sale’. For this, UCN had paid custom duty and the duty would be reimbursed by CISCO.

MSOs say... When ‘The Hitavada’ talked to a couple of MSOs in the city, the authorities concerned confirmed that they had installed Set Top Boxes ‘on lease’ to subscribers. “The subscriber may return Set Top Box whenever he wants to. We will pay him activation charges taken earlier, after deducting depreciation as per provisions pertaining to ‘depreciation of electronics goods’ under Income Tax Act. In case, there is a problem with a Set Top Box, the subscriber concerned shall have to pay repairing charges after warranty period of one year,” Ashutosh Kane, Director of UCN explained. Raju Dudhane, Director of InCable, said that Set Top Boxes were being installed as per the law. If a subscriber demanded money back, it would be returned, he added. “We cannot sell Set Top Boxes as per our policy,” he said.

Sales Tax Department to
act against errant MSOs Sales Tax Department is gearing up to take action against errant MSOs in the city. Additional Commissioner of Sales Tax Department G B Indurkar told ‘The Hitavada’ that the department would take stringent action if a MSO does not pay VAT. The department has sought relevant information from the district administration, and notices will be served to MSOs, he said. If any MSO does not give cash receipt or bill to consumers, penalty will be levied on them, Indurkar said. The amount of penalty will be half the amount of tax. He urged MSOs not to mislead people.