2021 (12) TMI 1299 - AAAR - GST

Taxable Goods: Vouchers under GST Law, Rate 18%

The Appellate Authority upheld the ruling that the supply of vouchers is taxable as goods under GST law at a rate of 18%. The time of supply for the ... Vouchers are not money in the hands of a third party reseller until redemption - vouchers qualify as movable property and therefore as goods when traded - vouchers are not actionable claims where the voucher is in the claimant's possession - supply of vouchers by a third party reseller is a supply of goods under Section 7 of the CGST Act, 2017 - time of supply for vouchers sold by a non issuer is governed by Section 12(5) of the CGST Act, 2017 - actionable claims other than lottery, betting and gambling are excluded from supply under Schedule IIIVouchers are not money in the hands of a third party reseller until redemption - money as consideration is when instrument is used to settle an obligation - Whether the vouchers purchased and sold by the Appellant constitute 'money' and are therefore outside GST. - HELD THAT: - The Authority held that although the vouchers are payment instruments recognised by RBI, they do not qualify as 'money' in the hands of the Appellant because they do not settle an obligation at the time of the Appellant's purchase and resale. Under the CGST Act, 'money' describes instruments when used as consideration to settle an obligation; that settlement occurs only upon redemption by the beneficiary. Until redemption, the voucher merely creates an obligation and therefore cannot be treated as 'money' exempt from GST treatment. (See para 12.) [Paras 12]The vouchers in the Appellant's hands are not 'money' for GST purposes.Vouchers qualify as movable property and therefore as goods when traded - elements of value, ownership and transfer in vouchers - Whether the vouchers traded by the Appellant are 'goods' under the CGST Act. - HELD THAT: - Applying the CGST definition of 'goods' (every kind of movable property other than money and securities) and the General Clauses Act definition of movable property, the Authority found that the vouchers have definable value, are transferable, and ownership passes on sale. The Appellant bought vouchers for consideration and sold them at face value to clients; thus the vouchers are movable property and fall within 'goods' under the CGST Act. The Authority distinguished the Sodexo decision on its facts (issuer authorised by RBI and different statutory context) and therefore did not apply it to the present facts of a third party reseller. (See para 13-15.) [Paras 13, 14]The vouchers traded by the Appellant are 'goods' for GST purposes.Vouchers are not actionable claims where the voucher is in the claimant's possession - actionable claims limited to unsecured debt or beneficial interest not in possession - Schedule III carve out for actionable claims other than lottery, betting and gambling - Whether the vouchers amount to 'actionable claims' and thereby fall outside supply under Schedule III. - HELD THAT: - The Authority analysed the two limbs of 'actionable claim' - (i) claim to an unsecured debt and (ii) claim to a beneficial interest in movable property not in the claimant's possession. The vouchers do not constitute a claim to unsecured debt. As to beneficial interest, the vouchers are themselves movable property and are in the possession of the claimant (the holder) at the time of transfer; consequently they do not meet the requirement of being a beneficial interest in movable property not in possession. The Authority further held that lottery tickets (discussed in Sunrise) differ factually since lottery tickets lack innate value; vouchers here have definitive value and therefore are not analogous. Accordingly the vouchers are not actionable claims excluded from supply. (See para 16-18.) [Paras 16, 17, 18]The vouchers are not 'actionable claims' and are not excluded from supply under Schedule III.Supply of vouchers by a third party reseller is a supply of goods under Section 7 of the CGST Act, 2017 - time of supply governed by Section 12(5) of the CGST Act, 2017 for non issuers - rate and value for GST treatment of vouchers as per the AAR ruling - Whether the Appellant's sale of vouchers is taxable and, if so, the applicable time of supply and related conclusions. - HELD THAT: - Having concluded that the vouchers are goods and not money or actionable claims, the Authority held that the Appellant's trading in vouchers amounts to 'supply' of goods under Section 7(1)(a) of the CGST Act. Because the Appellant is not the issuer authorised by RBI, the provisions in Sections 12(4) (which apply to the underlying supply identifiable at voucher issue by the issuer) do not apply; instead the time of supply for the Appellant's transaction is governed by Section 12(5). The Authority agreed with the lower Authority's conclusions on value, rate of tax and time of supply and therefore upheld the impugned advance ruling. (See para 19.) [Paras 19]The Appellant's sale of vouchers is taxable as supply of goods; time of supply for the Appellant is determined under Section 12(5), and the AAR's findings on rate and value are upheld.Final Conclusion: The AAAR upheld the Advance Ruling No. KAR ADRG 37/2021: vouchers traded by the Appellant are not 'money' or 'actionable claims' but are movable property constituting 'goods'; the sale of such vouchers by a non issuer is a taxable supply of goods under Section 7 and the time of supply for the Appellant is governed by Section 12(5). The appeal is dismissed. Issues Involved:1. Taxability of vouchers and the stage at which they become taxable.2. Classification of vouchers as goods or actionable claims.3. Applicability of GST on the supply of vouchers.4. Rate of tax applicable to vouchers.5. Time of supply for vouchers under GST law.Detailed Analysis:1. Taxability of Vouchers:The primary issue was whether the vouchers themselves, or the act of supplying them, is taxable under GST. The AAR held that the supply of vouchers is taxable and the time of supply in all three cases would be governed by Section 12(5) of the CGST Act, 2017. The rate of tax on the supply of vouchers was determined to be 18% GST as per entry no. 453 of Schedule III of Notification No. 01/2017-Central Tax (R) dated 28.06.2017.2. Classification of Vouchers as Goods or Actionable Claims:The appellant argued that vouchers are instruments redeemable for goods or services and should be considered as consideration rather than goods. They contended that vouchers are payment instruments under the Payment and Settlement Systems Act, 2007, and thus should not be classified as goods. The AAR, however, classified the vouchers as goods, stating that they have a value and ownership that transfers from the issuer to the beneficiary upon redemption.3. Applicability of GST on the Supply of Vouchers:The appellant argued that vouchers are not goods or services but are payment instruments or consideration for future supplies, and thus should not be subject to GST. They relied on the Supreme Court decision in Sodexo SVC India Pvt Ltd vs State of Maharashtra, which held that vouchers are not goods. The AAR disagreed, stating that the vouchers traded by the appellant are goods and not actionable claims, and thus are subject to GST.4. Rate of Tax Applicable to Vouchers:The AAR determined that the rate of tax on the supply of vouchers is 18% GST. The appellant contested this, arguing that since vouchers are not goods, they should not be subject to GST. However, the AAR upheld its decision, stating that the vouchers are goods and thus taxable at 18%.5. Time of Supply for Vouchers under GST Law:The appellant argued that the time of supply should be determined based on the redemption of the vouchers, as per Section 12(4) of the CGST Act. The AAR, however, ruled that since the appellant is not the issuer of the vouchers, the time of supply is governed by Section 12(5) of the CGST Act, which applies to the supply of goods.Conclusion:The Appellate Authority upheld the AAR's ruling that the supply of vouchers is taxable as goods under GST law, with a tax rate of 18%. The time of supply for the vouchers is determined by Section 12(5) of the CGST Act. The appeal filed by the appellant was dismissed on all counts.