Andhra Pradesh High Court Rules Fitness Equipment As 'Sports Goods' For VAT Purposes

Andhra Pradesh High Court Rules Fitness Equipment As 'Sports Goods' For VAT Purposes

Fitness equipment like treadmills, dumbbells, and weightlifting apparatus qualify as "sports goods" under Entry-60 of Schedule-IV of the A.P. VAT Act and are eligible for a concessional tax rate of 5%.

The Andhra Pradesh High Court, in a recent judgment, has ruled that fitness-related equipment, including treadmills, dumbbells, and weightlifting apparatus, qualifies as "sports goods" under Entry-60 of Schedule-IV of the Andhra Pradesh Value Added Tax Act (A.P. VAT Act), thereby entitling them to a concessional VAT rate of 5%.

Background:

The ruling was delivered while allowing a batch of writ petitions filed by M/s Acme Fitness Pvt. Ltd., a registered dealer of gym and fitness equipment under the A.P. VAT Act and the Central Sales Tax Act. The petitioner had classified its products under Entry-60 and had consistently paid VAT at the concessional rate of 5%. Additionally, returns were filed under the Central Sales Tax Act.

However, for multiple assessment periods ranging from 2015 to 2018, the Assessing Authority passed orders disallowing the concessional Central Sales Tax rate of 2% due to non-submission of C-Forms and F-Forms. Further, the goods were reclassified as “unspecified goods” under Schedule-V, thereby attracting VAT at the higher rate of 14.5%. Aggrieved by this reclassification, the petitioner challenged the assessment orders through writ petitions.

Petitioner’s Contentions:

The counsel for the petitioner, Mr. G.V.S. Ganesh and Mr. G. Tuhin Kumar, submitted that the goods in question—namely treadmills, dumbbells, weightlifting apparatus, rotators, and fit-kit exercise equipment—are either directly used in recognized sports (such as weightlifting) or are essential for physical conditioning and training of sports persons. Therefore, they must be classified as “sports goods” under Entry-60 of Schedule-IV.

Reliance was placed on the judgment of the High Court of Uttarakhand in M/s Bhatia Sports Company vs Commissioner of Commercial Tax, which held that fitness and exercise equipment qualify as sports goods eligible for a lower VAT rate. The petitioner also cited Cosco Industries Ltd. vs State of U.P. (2009), where the Allahabad High Court adopted a broader interpretation of the term “sports goods.”

Respondent’s Arguments:

The Government Pleader for Commercial Tax (Andhra Pradesh) argued that the goods in question were not linked to any specific sport, and as such, should be treated as general physical fitness equipment. It was contended that such items do not fall under Entry-60 and were rightly taxed under Schedule-V at 14.5%.

Court’s Observations:

The Division Bench comprising Justice R. Raghunandan Rao and Justice B.V.L.N. Chakravarthi addressed the central issue: whether fitness-related goods such as treadmills, dumbbells, and weightlifting equipment could be classified as “sports goods” under Entry-60 of Schedule-IV.

The Court noted that the assessing authority had adopted a narrow and restrictive interpretation by only considering goods directly tied to specific sports as eligible under Entry-60. However, the Court observed that the role of fitness equipment in the training, conditioning, and preparation of athletes across all sports disciplines establishes a clear link to sporting activities.

While weightlifting equipment is clearly associated with an established sport, the Court stated that other equipment like treadmills and dumbbells are crucial to the fitness regimes of sportspersons, and are thus integral to achieving and sustaining sports performance. It emphasized that denying concessional VAT based on a strict reading would defeat the object of the law meant to promote sporting activity.

The Bench also cited and aligned its reasoning with the judgments of the Uttarakhand and Allahabad High Courts, both of which had interpreted “sports goods” to include fitness equipment necessary for physical performance.

Court’s Decision:

The High Court allowed the writ petitions, set aside the assessment orders passed by the 5th respondent, and remanded the matters to the Assessing Authority for fresh consideration, directing that the goods be treated as falling under Entry-60 of Schedule-IV of the A.P. VAT Act and taxed at the concessional rate of 5%.