2021 (4) TMI 885 - AAAR - GST

Appellate authority rules on time of supply & tax rate for gift vouchers.

The appellate authority modified the Advance Ruling Authority's decision, ruling that the time of supply for gift vouchers/gift cards is the date of ... Voucher as an instrument of advance consideration for future supply - voucher neither a good nor a service - time of supply of vouchers under sections 12(4) and 13(4) - supply to be classified by nature of underlying goods or services - deeming of supply at time of issue to avoid double taxation - pre-paid instruments and RBI recognition as contextual factorVoucher neither a good nor a service - voucher as an instrument of advance consideration for future supply - Nature of vouchers issued by the appellant - HELD THAT: - The Appellate Authority held that a voucher is an instrument of advance payment of consideration for a future supply and, as such, is not itself a good or a service. The authority reasoned that treating a voucher as neither good nor service is sufficient without adjudicating whether it constitutes an actionable claim; the statutory definitions and the treatment of vouchers in the time of supply provisions indicate that vouchers operate only as a means of payment for an underlying supply. Consequently vouchers are not classifiable as distinct goods or services but relate to the supply they entitle the holder to receive. [Paras 7]Vouchers are neither goods nor services; they are instruments of consideration and are not classifiable separately apart from the underlying supply.Time of supply of vouchers under sections 12(4) and 13(4) - deeming of supply at time of issue to avoid double taxation - When the supply arising from vouchers is to be treated as having been made - HELD THAT: - Interpreting subsections (4) of the time of supply provisions, the Appellate Authority held that where a voucher identifies the goods or services that can be obtained on redemption (i.e., the supply is identifiable at the point of issue), the supply of the underlying goods or services is deemed to occur on the date of issue of the voucher. In other cases the time of supply is the date of redemption. The authority explained that this deeming avoids double taxation because the subsequent transfer/redemption will not attract tax if the supply has already been treated as made at issue. [Paras 7]If the voucher specifies the underlying supply, the time of supply is the date of issue; otherwise it is the date of redemption, and taxation at issue prevents double taxation on later redemption.Supply to be classified by nature of underlying goods or services - Classification and applicable rate for supplies relating to vouchers - HELD THAT: - Because vouchers are instruments of consideration and not supplies in themselves, the Appellate Authority concluded that the supply connected with a voucher must be classified according to the nature of the underlying goods or services. Consequently the tax rate applicable at the time the voucher is treated as effecting the supply (generally the date of issue where the supply is identifiable) is the rate applicable to the underlying goods or services to be supplied on redemption. [Paras 7, 8]The applicable rate of tax is the rate applicable to the underlying goods or services represented by the voucher; voucher itself is not separately classifiable.Deeming of supply at time of issue to avoid double taxation - Whether taxation at issue results in double taxation - HELD THAT: - The Appellate Authority specifically addressed the concern of double taxation raised by the appellant and held that taxing the underlying supply at the point of issue (where the supply is identifiable) does not amount to double taxation because the law deems the supply to have occurred at issue and, accordingly, the subsequent redemption/transfer will not attract tax on the same supply. [Paras 7]Taxation at the time of issue (where supply is identifiable) does not cause double taxation because the supply is deemed to have occurred at issue.Pre-paid instruments and RBI recognition as contextual factor - Questions left unanswered by the Advance Ruling Authority regarding third party PPIs, receipts from third party issuers and treatment of discount - HELD THAT: - The Appellate Authority noted that certain questions originally raised (relating to treatment of third party PPIs, taxability of amounts received from third party PPI issuers, and treatment of discount between face value and discounted value) were not answered by the AAR because it lacked jurisdiction to admit them. The Appellate Authority's decision modifies the AAR only on the classification and timing aspects; the jurisdictional non admission of those other questions remains and they were not adjudicated on merits in the present order. [Paras 3, 4, 8]Questions on third party PPIs, taxability of receipts from third party issuers and treatment of discount were not decided by the AAR for want of jurisdiction and remain unadjudicated in this order.Final Conclusion: The Appellate Authority modified the Advance Ruling to hold that vouchers are instruments of advance consideration (neither goods nor services), that where a voucher identifies the underlying supply the supply is deemed to occur on the date of issue (otherwise on redemption), and that the applicable tax rate is the rate applicable to the underlying goods or services; issues relating to third party PPIs and treatment of discounts were not decided for lack of jurisdiction. Issues Involved:1. Classification of Pre-Paid Instruments (PPIs) as supply of goods or services.2. Determination of the time of supply for PPIs.3. Applicable rate of tax for PPIs.4. Taxability of PPIs issued by third-party issuers.5. GST implications on amounts received from third-party PPI issuers.6. Compliance of GST provisions on redemption of PPIs.7. Treatment of discounts on PPIs issued by third-party issuers.Issue-wise Detailed Analysis:1. Classification of PPIs as Supply of Goods or Services:The appellant sought clarity on whether the issuance of their own closed PPIs to customers should be treated as a supply of goods or services. The Advance Ruling Authority (AAR) classified these PPIs as 'vouchers' under the CGST/TNGST Act 2017 and deemed them to be a supply of goods. The appellant argued that PPIs are actionable claims and should not be treated as goods or services, thus not subject to GST.2. Determination of Time of Supply for PPIs:The AAR ruled that the time of supply for gift vouchers or gift cards is the date of issue if the vouchers are specific to particular goods. If redeemable against any goods, the time of supply is the date of redemption. The appellant contended that taxing PPIs at issuance would lead to double taxation since GST is also levied at the time of redemption.3. Applicable Rate of Tax for PPIs:AAR classified paper-based gift vouchers under CTH 4911 with a tax rate of 6% CGST and 6% SGST, and gift cards under CTH 8523 with a 9% CGST and 9% SGST. The appellant did not specifically contest this classification but focused on the broader issue of whether PPIs should be taxed at all.4. Taxability of PPIs Issued by Third-Party Issuers:The AAR did not address the questions regarding the taxability of PPIs issued by third-party issuers, citing lack of jurisdiction. The appellant did not provide additional arguments on this point during the appeal.5. GST Implications on Amounts Received from Third-Party PPI Issuers:Similar to the previous issue, the AAR did not provide a ruling on the GST implications for amounts received from third-party issuers due to jurisdictional limitations. The appellant maintained that such amounts should not be subject to GST.6. Compliance of GST Provisions on Redemption of PPIs:The appellant argued that GST should only be collected at the time of sale of goods or services upon redemption of PPIs, not at the time of issuance. They claimed that taxing at issuance and redemption would lead to double taxation, which is against the provisions of the law.7. Treatment of Discounts on PPIs Issued by Third-Party Issuers:The AAR did not address the treatment of discounts (difference between face value and discounted value) for third-party PPIs, citing lack of jurisdiction. The appellant argued that they should not be liable to pay GST on this difference.Discussion & Findings:The appellate authority examined the arguments and statutory provisions in detail. They concluded that vouchers are a means for advance payment of consideration for future supply of goods or services and are neither goods nor services themselves. The authority emphasized that the supply of the underlying goods or services is deemed to occur at the time of voucher issuance if the supply is identifiable. This interpretation aligns with sections 12 and 13 of the CGST/TNGST Act, which specify the time of supply for goods and services.Ruling:The appellate authority modified the AAR's order, ruling that the time of supply for gift vouchers/gift cards is the date of issue, and the applicable tax rate is that of the underlying goods or services. The appeal was disposed of accordingly.