TaxTMI 
TaxTMI 
2019 (2) TMI 1004
X X X X Extracts X X X X
X X X X Extracts X X X X
....points by the applicant to end customers. These reward payment points have value of 0.25 INR each. 3. The party has submitted a copy of the Agreement with M/s. Nice Chemicals Pvt. Ltd. (NICE), as a representative agreement in support of its argument. Since this Agreement is with specific partner client, namely, NICE, this Agreement may be considered as the prototype of all Agreements made with various clients/ partners and all discussions regarding the Agreement are to be taken as relevant to and applicable for all the Agreements entered into by the applicant with various clients/ partners under reward point based loyalty programme. 4. For managing this loyalty programme, LSRPL is getting Management fee and/or service charges fee. The LSRPL are paying GST on the management fee as well service charges charged by them from NICE. The pattern of this loyalty programme is as follows. a) on purchase of products of "partners" to this loyalty programme, end-customers get reward/ payment points. b) These rewards points can be redeemed by customers, while making future purchases of products of "partners". c) In pursuance to these reward pöints management, "partner" transf....
X X X X Extracts X X X X
X X X X Extracts X X X X
....R per reward point to the Customers of the partners enrolled under the loyalty programme and on issuance of such points the applicant charges issuance fees. However, the applicant nowhere submits that the amount received by the applicant in return of issuing points are returned back to the partners when such points are not used within validity period. Therefore, it is not an actionable claim as the applicant fails to meet all the characteristics as stated by the applicant. The actionable claim as defined in section 3 of Transfer of Property Act, 1882 comprises two types of claims: (a) a claim to unsecured details and (b) claim to beneficial interest in movable property. If the beneficial interest in movable property is not in possession of the claimant it will be actionable claim but if it is in his possession or enjoyment, it Will not be actionable claim but a goods in possession. In the present case the pay back points are very much in the possession of the customers. Therefore, they cannot be termed as actionable claim. Hence, would attract GST. b) Yes, it would attract GST under the CGST, HGST or IGST Act as applicant received issuance fees from the partner....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Payback Points are in the nature of 'debt' or 'actionable claims' which are to be honoured by the Appellant as and when presented for redemption. (3) Since the points are 'debt' or 'actionable claims' which are to be honoured by the Appellant, the underlying value of the Payback Points so issued to / or redeemed by the End Customers is recovered by the Appellant from its Partners either at the time of their issuance or at the time of their redemption depending on the business model opted by the Partners. (4) The Payback Points so issued, normally have a validity period of 36 months during which the said points can be redeemed by the End Customers for any of the reward options available to them. (5) It is pertinent to note that the Appellant provides its Partners as well as the End Customers with a platform for allotting such Payback Points as well as to track redemption of Payback Points by End Customers. The Appellant also manages the reward options as well as relationships with the Redemption Partners for smooth redemption of such Payback Points. For such add on services, the Appellant charges a management fee against which Appellant issued invoice with....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Appellant and only the revenue received by the Appellant towards the Payback Points, being actionable claim / debt, becomes income of the Appellant and is retained by the Appellant. It is pertinent to note that the Appellant always offers its Partners with the option to choose between either of the afore-mentioned business models where it is always up to the Partner as far as selection of business model is concerned. It is further pertinent to note that some of the Appellant's biggest Partners have opted for the redemption model which can be inferred from the fact that during the F.YF.Y. 2014-15, F.Y. 2015-16 and F.Y. 2016-17 60%, 51%, 49% of the revenue (excluding other income) earned by the Appellant respectively, was from redemption model partners as compared to 31 %, 43%,47% respectively, earned by the Appellant from the issuance model. In this regard, some of the commercial considerations due to which the Partners opt for issuance model, are as follows: i. Partners are reluctant to provide appropriate bank guarantees to the Appellant to guarantee the value of payback points which are redeemed by the End customer. ii. Partners are more comfortable to discharge th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng or betting and therefore would not qualify as 'supply' of either 'goods' or 'services' in terms of Section 7 read with Schedule Ill of the Central Goods and Services Tax Act 2017 ("CGST Act"), Haryana Goods and Services Tax Act 2017 ("HGST Act") or Integrated Goods of Services Act ("IGST Act") and therefore would be outside the scope and of GST? b) Whether the value of points forfeited of the Appellant on which the money has been paid by the issuer of points on account of failure of the End Customers to redeem the Payback Points within their validity period can be treated as 'supply' of any other 'goods' or 'services' and consequently be chargeable to GST under the CGST, HGST or IGST Act? 1. In this regard, a brief summary of the statement containing Appellant's interpretation of GST provisions vis-å-vis the aforementioned factual scenario, as made in the Appellant's application for advance ruling is as follows: i. While "actionable claims" have been expressly included under the definition of "goods", only actionable claims in the nature of lottery, betting and gambling are covered under the scope of levy of GST In terms of Section 7 read with Entry 6 to Schedule ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the aforementioned application for advance ruling was held on 11 April 2018 and was attended by the Appellant's legal representatives. During the course of personal hearing, the Appellant's legal representatives reiterated the submissions made in the application for advance ruling. 3. In pursuance to the aforementioned proceedings the HAAR passed the Advance Ruling bearing no. HAR/HAAR/W2017-18/4 dated 11 April 2018 = 2018 (7) TMI 1421 - AUTHORITY FOR ADVANCE RULING - HARYANA communicated to Appellant on 27th June, 2018 (the "Impugned Order"). In this regard, a brief summary of the findings of the Impugned Order are as follows: i. During their validity period, Payback Points issued to various End Customers, are indeed in the nature of 'actionable claims' as defined under the provisions of the TPA. ii. However, after the expiry of the said Payback Points, they can no longer be redeemed / encashed by the End Customer, who loses all its rights over them. Therefore, on the expiry of their validity period, the Payback Points no longer remain to be in the nature of 'actionable claims'. iii. Therefore, post the expiry of the said Payback Points, they are not covered within the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed Order the Appellant has preferred this appeal on the grounds mentioned hereunder which are without prejudice to one another. The Appellant craves leave, to add to, amend, modify, rescind, supplement or alter any of the grounds mentioned hereunder and/or produce such records, documents, calculations as deemed *necessary either before or at the time of hearing of this appeal. Questions being agitated by the Appellant in present APPEAL: 9. The appellants raised the following questions for determination by the Appellate Authority for the Advance Ruling. 1) Whether the nature of Payback Points (Which are considered as actionable claim during their validity period in the impugned order of Authority of Advance Ruling changes post expirations of their validity period? And the amount retained by the Appellant on account of such expiration is therefore liable to be added to the value of taxable supplies made by the Appellant? 2) How can Payback points which are considered as "goods" during their validity period becomes supply of "services" post expiration? 10. Date of Receipt of the Appeal and Question of Time-bar. The Appeal to the Appellate Authority for Advance Rul....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in the absence of an evidence of application's timely receipt, the argument of timely dispatch held no good. That, the appeal has clearly become time-barred and right had already accrued to the authority to decide on the Appeal. However, the AAAR observed that given this to be a very initial phase of Advance Rulings or Appeals therein, a liberal view can be taken notwithstanding the non-adherence to time-schedule by the Appellant. Also, the Appeal being within the condonable period of further 30 days in terms of Proviso to Section 100(2) of the Acts ibid, the request for condonation of delay is being acceded to. b. Submission of the Applicant: During the hearing the appellant while reiterating the submissions made in their written reply put forth that the basic emphasis of their submissions was that an Actionable claim remains an actionable claim. They submitted that they are the holders of the IPR for the scheme of loyalty program and admitted that they are the manager of the entire functioning of the scheme at the ends of the partners and end-customers. In this regard the appellant brought forth the following points: i. There are 3 types of supplies, - 'Go....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uctive, of the claimant, which the Civil Courts recognize as affording grounds for relief, whether such debt or beneficial interest be existent, accruing, conditional or contingent: As mentioned, all kinds of actionable claims have been recognised as Goods in the GST Law. Section 2(52) of the Central and Haryana GST Acts define 'Goods' as under: (52) "goods" means every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply; Thus, under the GST law, there are only 3 types of supplies - Goods or Services or both. Supplies of all actionable claims are the supplies of Goods for the purpose of GST law. Also, as discussed infra, the amounts accounted for as revenue from the unredeemed Payback-points by the appellant, do not qualify to be actionable claims. The discussion on this aspect has been taken up infra. ii. There are no Invoices issuable for the 'Actionable Claims'; As mentioned, the unredeemed Payback-points by the appellant do not qualify to be actionable claims. Admittedly, the appe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on behalf of the Partners and forms a service by the appellant against consideration from Partners. Moreover the services are rendered by the Appellant to the Partners and nature of Appellants' relationship with end-customers is part of their contract/ concept. For taxation matters the relation between Appellants and end-customers has no bearing on the relationship between Appellant and the vender Partners. Whatever revenue is accruing to them, is from the vender Partners only. End-customers are nowhere in the scheme of things as for as supply of services is concerned. vi. They are selling the payback points which are actionable claims therefore their revenue in the instant case has resulted from the sale of payback points/ Actionable Claims. It is observed that the appellants are not selling any payback points but are providing a facility by way of a software programme to the Partners to help Partners generate and retain loyalty of the customers undertaking any transactions with them. Even if it is deemed for the arguments sake that the appellants are selling the Payback points, the consideration flows to them for the same from Partners only. However it is not the appe....