2021 (4) TMI 885 - AAAR - GST

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

In Re: M/s. Kalyan Jewellers India Limited

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 ... Time of supply of goods - facility of supply of different types of Pre-Paid Instruments (PPI's) - supply of goods or supply of service - applicable rate of tax for such supply of goods or services - issue of PPIs by the Third party PPI issuers subject to GST - amount received by the Applicant from Third Party PPI - GST collection at the time of sale of goods or services on redemption of PPIs i.e., own and from Third Party - reatment of discount (the difference between Face value and Discounted Value) in the hands of issuer of PPI in case of third party PPIs - GST on difference Value. HELD THAT:- Vouchers issued by the appellant are of the nature of actionable claims. Actionable claims, though included within the definition of goods under section 2 (52), have been included in schedule III as entry 6 and therefore cannot be treated either as supply of goods or supply of services. It follows that vouchers are not subject to levy of tax under the GST act - that there is an inherent contradiction in this argument, with the provision in sub sections (4) of section 12 and 13, that deal with determining the time of supply for goods and services respectively, both use the term 'voucher', and therefore indicate that voucher relate to both goods and services. If vouchers are to be treated as actionable claims, they are only goods and not services. When a voucher is issued, though it is just a means of advance payment of consideration for a future supply, subsection (4) of section 12 and 13 determine the time of supply of the of the underlying good(s) or service(s). Voucher per se is neither a goods not a service. It is a means for payment of consideration - there is no need to determine whether voucher is an actionable claim to arrive at a conclusion that it is neither a goods nor a service. Voucher by GST law is recognized as an instrument of consideration (non-monetary form) for future supply. Regarding classification of voucher, since voucher is only an instrument of consideration and not goods or services, the same is not classifiable separately but only the supply associated with the voucher is classifiable according to the nature of the goods or services supplied in exchange of the voucher earlier issued to the customer. Thus, the time of supply of the gift vouchers / gift cards by the applicant to the customers shall be the date of issue of such vouchers and the applicable rate of tax is that applicable to that of the goods. 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.