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Informist, Monday, Nov. 3, 2025

 

NEW DELHI – The Supreme Court Monday rejected a petition from the commissioner of central goods and services tax, Gurugram, demanding service tax of INR 1.19 billion and penalty of INR 1.25 billion from Bharti Airtel Ltd. on the call free allowance waiver granted by the telecommunications company to its employees. The court upheld the January order of the Chandigarh bench of the Customs, Excise, and Service Tax Appellate Tribunal quashing the demand and penalty against Bharti Airtel.

 

The case has its genesis from Bharti Airtel offering the "Airtel Employees Services Scheme" to its employees. Under this scheme, employees were granted a waiver from payment of telephone charges up to the call free allowance limit for mobile phones and fixed line connections. The waiver was allowable only to employees of Bharti Airtel and not their relatives or to employees of other group companies.

 

The tax department conducted an audit of Bharti Airtel, wherein the company was asked to submit details of the waiver granted to employees. Thereafter, show-cause notices were issued to the company for the period between April 2006 and September 2008 proposing the demand of service tax under the head "telephone services" on the amount of call free allowance waiver granted to its employees. The demand and penalty were confirmed by the commissioner of central goods and service tax. 

 

Bharti Airtel argued that there was no consideration charged by it either in cash or in kind in respect of calls made by employees up to a certain limit. Thus, it said it was not liable to pay service tax for the service provided by it as a government circular said no tax was payable when a service was provided free. 

 

Agreeing with Bharti Airtel's stand, the appellate tribunal had said free allowance given to employees by the company was in the nature of a concession and as the same had not accrued to the service provider, it could not be said to form part of the consideration for the purpose of levy of service tax. The appellate tribunal also said the tax department's show-cause notice was vague and did not specify the service that was rendered by Bharti Airtel. 

 

Monday, shares of Bharti Airtel Ltd. ended 1% higher at INR 2,074 on the National Stock Exchange.  End

 

Reported by Surya Tripathi

Edited by Rajeev Pai

 

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