2026-VIL-941-KAR
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VAT High Court Cases

Karnataka Value Added Tax Act, 2003 - Transfer of Right to Use Goods – Taxability of Rental Charges for Electronic Data Capture Terminals – Appellant-Bank providing payment processing services to merchant establishments and installing Electronic Data Capture Terminals (EDCT) commonly known as swiping machines with connected accessories and printers at merchant premises - Merchant establishments collected transaction-based charges as Merchant Discount Rate and separate fixed charges including monthly terminal rental charges, installation charges and maintenance charges - Appellant treated entire consideration as consideration for banking and financial services and discharged service tax - Department during reassessment proceedings held that rental charges for EDCT machines constituted consideration for transfer of right to use goods and amounted to deemed sale liable to tax under KVAT Act - Whether rental charges collected for EDCT machines constitute consideration for transfer of right to use goods liable to VAT - HELD - Transaction may contain different elements and may attract different levies under different statutes provided respective taxing fields are distinct and statutory requirements are satisfied - Payment of service tax on service component does not by itself exclude power of State to levy VAT on sale element if transfer of right to use goods is established - EDCT machines are identifiable and tangible goods installed at merchant premises and are separately identifiable from mere provision of banking service. Unlike SIM cards which are merely incidental to service rendered and do not confer independent right or utility, EDCT machines are separately identifiable and tangible equipment installed at premises of merchant establishments. Machine performs distinct function independent of mere provision of banking service - Merchant establishments are provided possession and operational access to identified equipment for accepting customer transactions, separate rental consideration is collected for such equipment - EDCT machines stand on different footing as compared to SIM cards in cellular operations. Retention of ownership and supervisory rights by Bank does not negate transfer of right to use such goods - Rental charges collected by Appellant in respect of EDCT machines constitute consideration for transfer of right to use goods and are liable to tax under VAT Act – The findings recorded by authorities below are based upon contractual terms, nature of equipment supplied and manner in which EDCT machines were made available to merchant establishments and do not suffer from any error warranting interference – The Revision Petition is dismissed
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