SC upholds K'taka govt decision to impose sales tax on photographs

The Supreme Court has upheld the Karnataka government’s decision to levy sales tax on processing and supply of photographs, photo prints and negatives, rejecting the plea that it was merely a service and did not involve much cost and goods.

A three-judge bench presided over by Chief Justice H L Dattu confirmed the constitutional validity of Entry 25 Schedule VI to the Karnataka Sales Tax Act, 1957, by which about 10 per cent tax was imposed on photographs and prints.

The bench, also comprising Justices A K Sikri and Arun Mishra rejected the argument that the processing of photographs etc was essentially a service, wherein the cost of paper, chemical or other material used in processing and developing photographs, photo prints was negligible.

“By virtue of clause 29-A of Article 366, the State legislature is now empowered to segregate the goods part of the works contract and impose sales tax thereupon. It may be noted that Entry 54, List II of the Constitution of India empowers the State legislature to enact a law taxing sale of goods. Sales tax, being a subject-matter in the State List, the state has the competency to legislate over the subject,” the court said.

Therefore, the court said, the government’s decision making that part of processing and supplying of photographs, photo prints and negatives, which have “goods” component eligible to sales tax is constitutionally valid.

A challenge to the State government’s decision was made contending, among others, that the amendment to the sales tax laws was made in 2004, so implementing it with retrospective effect from 1989 was not permissible.

Photo labs
Different photo labs including M/s Pro Lab also claimed that if they were directed to pay the amounts retrospectively, they would face severe financial crisis.

Besides, the move would also violate their fundamental rights guaranteed under Article 19(1)(g) of Constitution relating to freedom to carry on trade, business or profession.

However, the apex court relied upon different judgments to state that it was well settled that subject to Constitutional restrictions a power to legislate included a power to legislate prospectively as well as retrospectively.

“Thus the legislative power to impose tax also includes within itself the power to tax retrospectively,” the bench said, setting aside a Karnataka High Court judgement.