GST liability on Loyalty earned against purchase of fuel

[SUBRATA RAY]

A GTA receives loyalty point in monetary value against purchase of diesel for its vehicles. whether loyalty points earned in monetary value is liable for GST even though Diesel is still outside the purview of GST.

[Amit Agrawal]

Who is paying the 'loyalty points', on what purpose & what is the usage of these loyalty points? Moreover, it is unclear (at-least to me) whether the query raised is from point of view of receiver of loyalty points (i.e. GTA) or from point of provider (who-so it may be) of 'loyalty points'. 

Request you to kindly elaborate.

[KASTURI SETHI]

It is just like coupons. You may say sale-promotion of non-GST goods. Now how these coupons are redeemed by the buyer that matters i.e. determinant factor. 

Pl. elaborate your query for a comprehensive reply.

[SUBRATA RAY]

Loyalty points redeemed against purchase of NON GST supply I.e purchase of diesel

[KASTURI SETHI]

If loyalty points are redeemed within specified period, these are actionable claims and hence neither goods nor services are as per Schedule-III of CGST Act. However, if redeemed after expiry of the specified period i.e. validity period is over, it will not fall under the definition and scope of actionable claim. Then these will be classified under 'tolerating an act ' and will be taxable.

Pl. go through the following decisions of  AAR Haryana and  AAAR Haryana

(i) 2018 (7) TMI 1421 - AUTHORITY FOR ADVANCE RULING - HARYANA - IN RE : LOYALTY SOLUTIONS AND RESEARCH PRIVATE LIMITED

(ii) 2019 (2) TMI 1004 - APPELLATE AUTHORITY FOR ADVANCE RULING, HARYANA - IN RE : LOYALTY SOLUTIONS AND RESEARCH PVT. LTD.

[Shilpi Jain]

These loyalty points can be looked like one type of discount only. It should not entail any liabilities. Though it also depends on how this scheme is worded and given effect to.

[Ganeshan Kalyani]

I agree with the views of the expert. It is a kind of discount we can say, which is to be adjusted against future supply. The only thing here is that there is no credit note but only a loyalty point. Loyalty point is a kind of coupon. Bank also give points on usage of credit card. The points can be converted into a coupon and the same can be used for purchase of things (any item, say cloth, groceries etc). The time of supply for coupon is - when supplier is determined then that point is the taxable event and when supplier is not identified then time of supply would be the time of redemption of such coupon. Here in this case the supplier is same (ie known at the time of supply) so GST would be applicable at the time of giving loyalty point.

AI Summary

GST on loyalty points may arise depending on characterization and time of supply, affecting diesel-related rewards.
GST on loyalty points issued against diesel depends on characterisation and timing: points that qualify as an actionable claim during their validity are outside Schedule III and not taxable; points that cease to be actionable claims after expiry may be taxable as a act of toleration. Where the loyalty instrument is a coupon or discount, if the supplier is identifiable at issuance GST may arise at issuance; if not, time of supply is on redemption. Scheme terms and redemption mechanics therefore control GST liability.