The Karnataka High Court has upheld the imposition of sales tax on set-top boxes (STBs) provided by cable network operators to subscribers, dismissing a legal challenge from companies such as ACT, Tata Play, and Den Network.
A division bench ruled that transferring the right to use STBs in exchange for payment qualifies as a “sale” under the Karnataka Value Added Tax Act, 2003 (KVAT Act), making it subject to taxation. The judgment aligns with an earlier decision by the Karnataka Appellate Tribunal, which found that STBs fall within the definition of taxable goods.
The petitioners argued that STBs are merely devices facilitating signal reception and should not be classified as goods. They contended that ownership of the STBs remained with the operators, and subscription fees covered activation services rather than equipment use. Additionally, they challenged the validity of a 2021 government notification that extended tax assessments retroactively from July 2017 onward.
The court, however, sided with tax authorities, stating that STBs are movable property and that subscribers have exclusive control over their use. It also dismissed concerns over double taxation, ruling that service tax applies to signal transmission while VAT is levied on the equipment itself.
This decision solidifies the state’s stance on taxing digital infrastructure provided by service operators, potentially impacting how telecom and broadcast companies structure their services going forward.
