2020 (1) TMI 30 - AAR - GST

Classification of Own Closed Pre-Paid Instruments as 'Vouchers' under CGST Act

The judgment classified Own Closed Pre-Paid Instruments (PPIs) issued by the applicant as 'vouchers' under the CGST Act, considering them as a supply of ... Voucher - Actionable claim - Supply of goods - Time of supply of vouchers - Classification of printed vouchers under CTH 4911 - Classification of gift cards under CTH 8523 - Jurisdiction of Advance Ruling AuthorityVoucher - Actionable claim - Supply of goods - Own closed PPIs issued by the applicant are vouchers and constitute a supply of goods under the CGST/TNGST Act, 2017. - HELD THAT: - The Authority examined whether the instruments issued by the applicant are 'actionable claims' or 'vouchers' within the meaning of the Act. The PPIs (gift vouchers/gift cards) are payment instruments under the Payment and Settlement Act, 2007 but do not constitute a claim to a debt or a beneficial interest in movable property as envisaged by Section 3 of the Transfer of Property Act; they become invalid if lost or not produced within validity and are accepted as consideration or part consideration for supply of goods at identified supplier outlets. Consequently, the instruments satisfy the definition of 'voucher' in section 2(118) of the CGST Act. As 'vouchers' are not money or actionable claims and are movable property, they fall within the definition of 'goods' under section 2(52). The face value paid at sale of vouchers is a consideration in the course or furtherance of business, bringing the transaction within 'supply' under section 7. Applying these statutory definitions and the legislative record concerning the insertion of 'voucher', the Authority held that the applicant's own closed PPIs are vouchers and amount to supply of goods under the CGST/TNGST Act.Own closed PPIs are vouchers and are a supply of goods under CGST/TNGST Act, 2017.Time of supply of vouchers - Voucher - The time of supply of vouchers is the date of issue if the supply is identifiable at that point; otherwise it is the date of redemption. - HELD THAT: - Section 12(4) governs time of supply where vouchers are involved. If a voucher is specific to particular goods identified at the time of issue, the date of issue is the time of supply. Where the voucher is redeemable against any goods (i.e., the supply is not identifiable at issuance), the time of supply is the date of redemption. Applying the statutory test to the applicant's vouchers, which are in most cases redeemable against any jewellery item, the Authority held that time of supply, in those cases, is the date of redemption; only vouchers specific to particular goods would have time of supply at issue.Time of supply is date of issue when supply is identifiable at issue; otherwise date of redemption (applicant's generally redeemable vouchers: time of supply on redemption).Classification of printed vouchers under CTH 4911 - Classification of gift cards under CTH 8523 - Paper-based gift vouchers are classifiable under CTH 4911 and card-based (electronic/magnetic/smart) gift cards are classifiable under CTH 8523; corresponding GST rates apply. - HELD THAT: - The Authority applied tariff nomenclature and explanatory notes. Paper printed vouchers are printed matter falling under Chapter 4911 (CTH 49119990) and thus attract the rates specified for that classification. Plastic/electronic gift cards with magnetic stripe or smart card functionality fall within Chapter 8523 (e.g., CTH 8523.21.00 or 8523.52) as media capable of electronic reading. The Authority accordingly identified the applicable rates under the notifications referenced: paper vouchers at the notified rate for CTH 4911 and gift cards at the notified rate for CTH 8523.Paper vouchers (CTH 4911) attract the notified rate applicable to that heading; gift cards (CTH 8523) attract the notified rate applicable to that heading.Jurisdiction of Advance Ruling Authority - Questions relating to PPIs issued by third-party PPI issuers, and supply/consideration between distinct entities (applicant, Qwikcilver, Kalyan Jewellers Kerala), are not admitted because this Authority lacks jurisdiction over activities of those distinct entities. - HELD THAT: - The contractual and supply chain facts show that Kalyan Jewellers Kerala is the PPI issuer vis-a -vis Qwikcilver and that Qwikcilver undertakes marketing/activation and supplies vouchers to customers; these involve distinct persons/entities and activities beyond the territorial and subject-matter jurisdiction of this AAR. Accordingly, questions about GST treatment at issue for third-party PPI issuers, amounts received by the applicant from third parties, GST compliance on redemption for third-party PPIs, and treatment of discount/incentive in third-party arrangements were not admitted for determination by this Authority.Questions 4-7 concerning third party PPI issuers are not answered as the Authority does not have jurisdiction to admit those questions.Final Conclusion: The Authority ruled that the applicant's own closed PPIs (gift vouchers/cards) are 'vouchers' and a supply of goods; time of supply is issue date if the supply is identifiable at issue, otherwise redemption date (applicant's general vouchers: time of supply on redemption); paper vouchers classify under CTH 4911 and card-based vouchers under CTH 8523 with the corresponding notified GST rates. Questions concerning third party PPI issuers were not admitted for want of jurisdiction. Issues Involved:1. Classification of Own Closed PPIs as supply of goods or services.2. Determination of the time of supply for Own Closed PPIs.3. Applicable tax rates for the supply of Own Closed PPIs.4. GST applicability on PPIs issued by Third Party PPI Issuers.5. GST applicability on amounts received from Third Party PPI Issuers.6. Sufficiency of GST collection at the time of redemption of PPIs.7. GST liability on the discount value in case of third-party PPIs.Issue-wise Detailed Analysis:1. Classification of Own Closed PPIs as Supply of Goods or Services:The applicant, a manufacturer and trader of jewelry, issues Own Closed Pre-Paid Instruments (PPIs) to customers. These PPIs are redeemable at any of the applicant's outlets. The applicant contends that these PPIs are actionable claims and not subject to GST. However, the judgment clarifies that PPIs are not actionable claims but are instead classified as 'vouchers' under Section 2(118) of the CGST Act. The judgment states, 'Therefore the PPIs under consideration squarely falls under the definition of 'Voucher' as defined in section 2(118) of CGST Act.' Consequently, these vouchers are considered 'goods' under Section 2(52) of the CGST Act.2. Determination of the Time of Supply for Own Closed PPIs:The time of supply for vouchers is governed by Section 12(4) of the CGST Act. The judgment specifies, 'if the vouchers are specific to any particular goods specified against the voucher, then the date of issue of vouchers is the time of supply of vouchers to the customer.' If the vouchers are redeemable against any goods, the time of supply is the date of redemption of the voucher.3. Applicable Tax Rates for the Supply of Own Closed PPIs:The judgment provides the applicable tax rates based on the classification of the vouchers:- For paper-based gift vouchers (classified under CTH 4911), the applicable rate is 6% CGST and 6% SGST.- For gift cards (classified under CTH 8523), the applicable rate is 9% CGST and 9% SGST.4. GST Applicability on PPIs Issued by Third Party PPI Issuers:The judgment does not address this issue as it pertains to activities undertaken by entities outside the jurisdiction of the Authority for Advance Ruling, Tamil Nadu. The judgment states, 'This Advance Ruling Authority does not have Jurisdiction over the activity undertaken by these entities.'5. GST Applicability on Amounts Received from Third Party PPI Issuers:Similar to the previous issue, this question is not answered due to jurisdictional limitations. The judgment reiterates, 'This Advance Ruling Authority does not have Jurisdiction over the activity undertaken by these entities.'6. Sufficiency of GST Collection at the Time of Redemption of PPIs:This issue is also not addressed due to the jurisdictional scope of the Authority for Advance Ruling, Tamil Nadu. The judgment maintains, 'This Advance Ruling Authority does not have Jurisdiction over the activity undertaken by these entities.'7. GST Liability on the Discount Value in Case of Third-Party PPIs:The judgment does not provide a ruling on this issue due to jurisdictional constraints. It states, 'The questions raised at Sl.No. 4,5,6 and 7 are not answered for the reason that the said questions are not admitted as this authority does not have jurisdiction.'Ruling:1. Own Closed PPIs issued by the applicant are classified as 'vouchers' and are considered a supply of goods under the CGST/TNGST Act 2017.2. The time of supply for such gift vouchers/gift cards is the date of issue if specific to particular goods, otherwise, it is the date of redemption.3. The applicable tax rates are 6% CGST and 6% SGST for paper-based vouchers (CTH 4911) and 9% CGST and 9% SGST for gift cards (CTH 8523).4. Questions related to third-party PPIs are not addressed due to jurisdictional limitations.