2024 (1) TMI 920 - HC - GST

Gift vouchers are actionable claims under GST law, tax liability depends on voucher specificity and redemption timing

Tvl. Kalyan Jewellers India Ltd., Rep. by its Branch Manager, Authorized Signatory Versus Union of India Represented by its Secretary, Department of Revenue, Tamil Nadu State Appellate Authority for Advance Ruling, The Commissioner of GST & C. Ex., The Assistant Commissioner (ST)

Madras HC held that gift vouchers/cards are actionable claims under GST law, qualifying as debt instruments that acknowledge debt and create ... Levy of GST - Gift Vouchers - specific case of the petitioner is that these Gift Vouchers/Gift Cards are “actionable claims” and therefore not liable to tax as they fall within the purview of the execution in Section 7(2) of the respective GST Enactments read with Schedule III to the respective GST Enactments - HELD THAT:- “Gift Voucher/Card” issued by the petitioner is a “document” within the meaning of Section 3(18) of the General Clause Act, 1897 and thus an “instrument” within the meaning of Section 2(14) of the Indian Stamp Act, 1899 as a right/liability is created and is recorded. The amount specified in it is a debt - “Gift Voucher/Card” thus acknowledges debt. Thus, “Gift Voucher/Card” is nothing but a “debt instrument”. It can be redeemed on a future date on its presentation towards ‘sale consideration’ for purchase of the merchandise from any one of the petitioner’s retail outlets. The “Gift Voucher/Card” is a debit card. It is like a frozen cash received in advance and thaws on its presentation at the retail outlet for being set off against the amount payable by a customer for purchase of merchandise sold by the petitioner or the amount specified therein is to be returned to the customer as per RBI’s Master Direction where a customer fails to utilize it within the period of its validity - “Gift Voucher/Card” is therefore an “actionable claim” within the meaning of Section 2(1) of the respective GST Enactments read with Section 3 of the Transfer of Property Act, 1882. Since “Actionable claim” is specified in Sl.No.6 in the Schedule III, no tax is payable on it. “Gift voucher/Card” issued by the petitioner qualify as “actionable claim” within the meaning of the definition of “actionable claim” in Section 3 of the Transfer Act, 1882 as incorporated in Section 2(1) of the respective GST Enactments - the view in the impugned order that there is no need to determine whether “voucher” is an “actionable claim” to arrive at a conclusion that it is neither a supply of “goods” nor a supply “service” in a way is partly correct. However, the ultimate conclusion arrived is not correct. The confusion and doubt surrounding the interpretation of Section 12(4) of the respective GST Enactments are partly on account of the fact that it is a new provision under the new regime under the respective GST Enactments as in force from 01.07.2017 - Neither, the definition of ‘Voucher’ as in Section 2(118) nor Section 12(4) of the respective GST Enactments were there in the Model GST Laws that were in circulation in 2016. If the “Gift Vouchers/Cards” is for a specified item of jewellery of specified value, tax is payable at the time of its issuance, as there is supply(i.e transfer) within in the meaning of Section 7(1-A) of the respective GST Enactments read with Sl.No.1(c) to the II Schedule to the respective GST Enactments. Therefore, tax is payable in view of Section 12(4)(a) of the respective GST Enactments at the time of issuance of such “Gift Vouchers/Cards” - if there is no supply ie. no transfer within in the meaning of Section 7(1-A) of the respective GST Enactments read with Sl.No.1( c) to the II Schedule to the respective GST Enactments, time of supply will get postponed to the actual time of redemption of the “voucher” to a future date of sale of merchandise or such goods when such Gift Voucher/Card is presented by the customer at the Counter of the petitioner. The petitioner will be liable to tax on the date of redemption under Section 12(4)(b) of the respective GST Enactments - the clarification in the impugned order is modified to that extent. The impugned order is quashed to that extent. This writ petition is partly allowed. Issues Involved:1. Classification of Pre-Paid Instruments (PPIs) as supply of goods or services.2. Determination of the time of supply and applicable tax rate for PPIs.3. Taxability of PPIs issued by third parties.4. Treatment of discounts on PPIs.5. Definition and taxability of 'Gift Vouchers' under GST.6. Whether PPIs are actionable claims and their tax implications.Issue-wise Summary:1. Classification of PPIs:The petitioner sought clarification on whether the issue of own closed PPIs by the applicant to their customers should be treated as supply of goods or services. The Tamil Nadu Advance Ruling Authority (AAR) ruled that the own closed PPIs issued by the applicant are 'vouchers' as defined under CGST/TNGST Act 2017 and are a supply of goods under the respective GST enactments.2. Time of Supply and Applicable Tax Rate:The AAR determined that the time of supply for such gift vouchers/gift cards by the applicant to the customers shall be the date of issue if the vouchers are specific to any particular goods. If the gift vouchers/gift cards are redeemable against any goods, the time of supply is the date of redemption. The applicable tax rates were specified based on the classification of the vouchers under the respective tariff headings.3. Taxability of PPIs Issued by Third Parties:The AAR did not answer questions related to the taxability of PPIs issued by third parties, stating that the authority does not have jurisdiction over these matters.4. Treatment of Discounts on PPIs:The AAR did not address the treatment of discounts (the difference between face value and discounted value) in the hands of the issuer of PPIs, as these questions were not admitted due to lack of jurisdiction.5. Definition and Taxability of 'Gift Vouchers':The second respondent, Tamil Nadu State Appellate Authority for Advance Ruling (TNSAAAR), modified the AAR's order, concluding that a voucher is neither goods nor services but a means for payment of consideration. The term 'Gold Voucher' was corrected to 'Gift Voucher.' The impugned order held that the gift voucher would be taxable at the time of issuance in view of Section 12(4)(a) of the respective GST enactments.6. PPIs as Actionable Claims:The petitioner argued that gift vouchers/gift cards are actionable claims and not liable to tax as they fall within the purview of the exclusion in Section 7(2) of the respective GST enactments read with Schedule III. The court examined various definitions and concluded that the gift vouchers/cards are actionable claims and thus not liable to tax by themselves. However, if the gift vouchers/cards are issued for specified goods, tax is payable at the time of issuance. If issued for unspecified goods, tax is payable at the time of redemption.Final Judgment:The court partly allowed the writ petition, modifying the impugned order to clarify that if the gift vouchers/cards are for specified items, tax is payable at the time of issuance. If for unspecified items, tax is payable at the time of redemption. The impugned order was quashed to the extent of this clarification.