SC stays Karnataka’s VAT demand on Antrix for leasing satellite transponders. Dispute centers on whether it’s a service or a sale under tax law.
New Delhi: The Supreme Court of India has put a temporary hold on the Karnataka Commercial Taxes Department’s demand of Rs. 317.5 crore in Value Added Tax (VAT) from Antrix Corporation Ltd., the commercial arm of the Indian Space Research Organisation (ISRO).
The tax dispute relates to whether leasing satellite transponder capacity should be treated as a sale of goods (which is taxable under VAT laws) or as a service (which comes under service tax).
The Karnataka tax authorities had raised a total VAT demand of Rs. 634.89 crore for the period between August 2008 and March 2014.
They argued that Antrix’s lease of satellite transponder capacity was a
“transfer of right to use goods,”
which is taxable under Karnataka’s VAT law.
Back in 2016, the Karnataka High Court had asked Antrix to deposit 50% of the VAT amount — that is, Rs. 317.5 crore.
However, this demand was not enforced for several years. In December 2024, the state tax department suddenly restarted recovery proceedings and sent a fresh endorsement to Antrix on June 9, 2025.
Antrix then moved the Supreme Court, saying that the earlier interim stay order given in 2010 (which was for a similar VAT dispute covering April 2005 to July 2008) should also be applied to this later demand.
They claimed that the service was already taxed — they had already paid Rs. 716.03 crore in service tax for the same period — and charging VAT as well would mean the same income was being taxed twice.
Antrix’s lawyers said that leasing satellite transponder capacity only helped transmit signals — it did not give control or ownership of the satellite to their customers.
So, it should be treated as a service, not a sale of goods.
They referred to a key Supreme Court judgment from 2006 in BSNL v. Union of India, where the Court had said:
“mere access to a network does not amount to transfer of goods.”
They also pointed out that the satellite transponders are located 36,000 km above the Earth in outer space and said:
“satellite use in outer space (36,000 km above Earth) could not be said to constitute use of goods within Karnataka,”
which is a necessary requirement under Section 6(4) of the Karnataka VAT Act.
On the other hand, the Karnataka Government’s counsel argued that the stay granted in 2010 applied only to the earlier period, and Antrix was still legally required to pay 50% of the later VAT demand as directed by the High Court.
They also said that even if the satellite was in space, Antrix’s clients were given full control through the allocation of frequencies, which meant that:
“Antrix’s clients effectively exercised legal control over transponders through frequency allocation,” and that made the lease a “deemed sale.”
After hearing both sides, the Supreme Court bench of Justices Prashant Kumar Mishra and Manmohan passed an interim order staying the Karnataka government’s June 2025 recovery notice.
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The bench also noted that the case was already pending before the Court and under its review.
The Court said it would hear the matter further and issued a notice regarding Antrix’s interlocutory application. It added the case to the hearing list for the second week of August.
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