Companies have filed a writ petition in the Goa bench of the Mumbai HC and are challenging that the government can't charge indirect tax for doing its duty. The writ petition challenges license fees charged to telecom, mining cos and casinos. Cos are challenging a circular issued under GST framework that provides for levying GST on license fees received by the government.

At a time when telecom majors are embroiled in a crisis over paying AGR dues and Goods and Services Tax (GST) refund, a group of small companies have dragged the government to court over tax on license and spectrum fees.

The companies have filed a writ petition in the Goa bench of the Mumbai High Court and are challenging that the government cannot charge indirect tax for doing its duty. The writ petition challenges license fees charged to telecom, mining companies and casinos.

The companies are challenging a circular issued under GST framework that provides for levying GST on license fees received by the government. The companies are challenging the premise that government can slap tax on license fees as this is the sovereign function of the state. This comes at a time when telecom majors are embroiled in a tussle over Adjusted Gross Revenue (AGR)dues.

“The Circular proceeds to impose tax on license fees paid to the government for its sovereign function without appropriate statutory backing and will have far reaching consequences for different sectors who pay such licence fees to the Government”, said Abhishek A Rastogi, partner at Khaitan & Co, who is arguing for the petitioners.

Government in October last year had issued a circular around GST on license fee charged by states for granting liquor license to vendors. Tax experts say that the circular has caused problems for several other companies as they had to cough up GST on license fees taken.

“As there is no intelligible differentia between exemption granted to alcoholic liquor license fees and other license fees paid to the government, the circular will have to clear the test of Article 14”, said Rastogi, who is representing the companies in the case. Article 14 of the constitution refers to right to equality.

Industry trackers say that the writ petition while doesn’t directly mention any telecom operators could also impact the current crisis over AGR and refund of GST.

Telecom operators including Vodafone IdeaNSE -35.05 % and Airtel have been asked to pay thousands of crores in AGR dues. The Department of Telecom (DoT) has pegged the total AGR dues at Rs 1.47 lakh crore. Telcos like Airtel and Vodafone Idea have disputed the amount and have come up with their own figures that are significantly less than what the government has asked for.

The telecom companies that are already facing financial stress has sought that the government adjusts GST refunds of around Rs 8,000 crore against its AGR dues.