AI Drafter 
TaxTMI 
TaxTMI 
2020 (1) TMI 30
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....pany registered under GST Act in TamilNadu vide GSTIN: 33AADCK6079K1Z8. They also have registered office at Sitaram Mill Road, Punkunnam, Thrissur, Kerala 680002. The Applicant is carrying on the business of Manufacturing and Trading of Jewellery Products in Tamil Nadu as well as across different states in India. The Applicant has sought Advance Ruling on the following questions : 1. Whether the issue of Own Closed PPIs by the 'Applicant' to customers be treated as supply of goods or supply of services as defined under the provisions of the CGST / SGST Act 2017 and rules, notifications there on. 2. If yes, is the time of issue of Own Closed PPIs by the 'Applicant' to customers is the time of supply of goods or services warranting tax liability 3. If yes, what is rate of taxes applicable for such supply of goods or services as the case may be 4. If yes, whether the issue of PPIs by Third Party PPI Issuers subject to GST at the time of issue in their Hands 5. Whether the amount received by the 'Applicant' from Third party PPI issuers subject to GST 6. If No, GST collection at the time of sale of goods or services on redemption of ....
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....o impact of discount effecting GST liability. 2.2 The Applicant stated that PPIs are actionable claims or equivalent to money and issuing of PPIs are not supply of goods or services under the CGST Act and hence it is not taxable. The sale or service affected at the time of redemption of such PPIs are supply and will be taxed at the rates prescribed for such goods. As per Section 2(1) of CGST Act 2017 "Actionable Claims" shall have the same meaning as assigned to it under the Section 3 of the Transfer of Property Act, 1882. Further, Clause-6 of the Schedule III to the CGST Act 2017 lists actionable claims as an activity which is neither a supply of goods nor supply of services. The Applicant has stated that these types of PPIs are in general practice in market and also various retail companies handle such PPIs in India. They are not collecting any GST on such PPIs while issuing. The Applicant in support of their claim and clarification sought for has filed copy of Reserve Bank of India's Circular dated 11^th October 2017, Distribution Agreement entered with the third party viz., M/s. Qwickcilver Solutions Pvt Ltd, Bangalore who issues PPIs [Gift Card/ Gift Voucher] on behalf of t....
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....s: These PPI's are issued by banks and are used at any merchant location for purchase of goods and services including facilitation of cash withdrawals at ATM / Point of Sales (POSs)/ Business correspondents (BCS). This type of PPI's not applicable to the Applicant. • The levy of central excise and service tax did not apply on PPIs. The levy of octroi on "Sodexo Meal Vouchers" was not sustained by Hon'ble Supreme court in case of Sodexo Vs. Maharashtra = 2015 (12) TMI 1041 - SUPREME COURT. They submitted a copy of a sample gift voucher which has the brand name of the applicant "kalyan", "Gift Voucher" with value of money equivalent. In the Terms and conditions, it states the date validity of the voucher. Voucher cannot be exchanged for cash and no refunds will be given. It has to be produced in original at store. NO duplicate will be issued in case of loss. It is not a legal tender. 3.2 KJIL vide their letter dated 03.12.2018 furnished the Accounting Procedures-Gift Vouchers; Ledger Copies of Gift Vouchers of branches-Karur, Kumbakonam, Ramanathapuram; Sample invoice copies of corresponding Gift Vouchers of Karur, Kumbakonam, Ramanathapuram; and Copy of the Paymen....
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....8 showing the entry of Gift voucher on 27.12.2018. On perusal of Trial balance, it is seen that the Applicant reflects entries of Gift Voucher account under 'Advance from Customers' under the heading 'Other Current Liabilities' for amounts . and Sundry Creditors. 3.4 The applicant was heard on 22.02.2019. The applicant appeared and submitted a case law stating that PPI is an actionable claim. They stated that it is not goods or service and GST will be applicable only when the PPI / Vouchers are redeemed and GST charged on the goods. They stated that they will submit Balance Sheet indicating the heads where the Outstanding gift vouchers and redeemed Vouchers are reflected. The applicant has furnished a written submission enumerating the Legal Position and Taxation as follows: • PPIs are not goods for the following reasons • PPIs are governed by a Master Direction issued by Reserve Bank of India w.e.f. 11-10-2017 under Section -18 read with Section 10(2) of the Payment and Settlement System Act, 2007. • PPI's are a kind of 'Actionable Claim' as defined under Section 3 of Transfer of Property Act, 1882. • Equivalent to money o As ....
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.... merged with a supply of goods and the scope for levy of service tax is completely absent. • The time of supply of goods/ services, where vouchers are involved, it is specified under Sub-section (4) of Section 12 & Section 13 of the GST Act as under; i) the date of issue of voucher, if the supply is identifiable at that point; or ii) the date of redemption of vouchers, in all other cases. • In this case, the supply is not identifiable, as the Jewellery is class of goods comprising of numerous items of gold or diamond jewellery and exact item of goods are not identifiable or ascertainable at the time of issue of voucher (PPI), hence time of supply could not be fixed for the levy at the time of issue of vouchers (PPIs). • Moreover it is an actionable claim, will not come under the purview of GST as per the Clause 6 to the Schedule III to the GST Act. 4. We have carefully examined the statement of facts, supporting documents and the case laws filed by the Applicant and heard the arguments made by them during personal hearing on 20.11.2018 & 22.02.2019. From the various submissions before us, we find that the 'Applicant', as p....
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.... such instruments is not classified as payment systems requiring approval / authorisation by the RBI. • Para 2.5 Semi - Closed System PPIs: These PPIs are used for purchase of goods and services including financial services, remittance facilities, etc., at a group of clearly identified merchant locations/ establishments which have a specific contract with the issuer (or contract through a payment aggregator / payment gateway) to accept the PPIs as payment instruments. These instruments do not permit cash withdrawal, irrespective of whether they are issued by banks or non - banks. • Para 2.8 Merchants: These are the establishments who have a specific contract to accept the PPIs issued by the PPI issuer(or contract through a payment aggregator [payment gateway) against sale of goods and services, including financial services. • Para 3 states that semi-closed PPIs will be issued only after obtaining authorization from RBI • Para 7 state that PPI issuers shall ensure that the name of the company which has received authorization for issuance and operating of ppis, is prominently displayed along with the approved brand name. The PPI are....
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....ers on receiving the face value as per the requirement of the customer and the customer or holder of such PPI can redeem these PPIs in any outlets of KJIL across the country at the time of purchase of jewellery. They have also stated that the Kerala office of KJIL have entered into an agreement with M/s. Qwickcilver Solutions Pvt Ltd, Bangalore who is engaged in the business of facilitating the distribution of Gift Cards through various channels. It is seen from the agreement that KJIL, Kerala has entered into this agreement for distribution of its "Gift Cards" through Qwikcliver's online portal woohoo.com, corporate sales team and its other distribution channels. The "Gift Cards" are issued by KJIL which can be loaded with value that can be redeemed for purchase only at designated stores specified by KJIL, Kerala. As per Annexure 1 to the agreement, after sale, the gift card will allow the bearer to shop for the amount mentioned in the gift card issuers stores. The un-activated cards are provided to Qwickcilver who will activate the same electronically before sale. Each month, qwikcilver will charge a service fee on the load value of activated cards. The service fee varies dependi....
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....e further stated that PPIs are neither goods nor services. They have relied on the decision of the Hon'ble Supreme Court in the case of M/s. Sodexo. 5.2 To answer the questions raised, it is to be ascertained as to whether the PPI under consideration are 'actionable Claims' as defined under law or 'Vouchers' as defined under the Act and thereafter as to how the issue of PPIs are to be considered, i.e., as goods or services and then the 'Time of Supply' and 'Rate' applicable. We find GST Acts define 'Goods', 'Supply', 'Actionable Claim', 'Vouchers' as follows: • 'Goods' are defined under Section 2(52) of the Act as (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; • Supply is defined under Section 7 of GST Act as under: 7. (1) For the purposes of this Act; the expression "supply" includes- (a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, license, rental, lease or disposal mad....
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....luding the terms and conditions of use of such instrument; 5.3 In the case at hand, it is stated that the gift cards / vouchers are purchased by the customers on paying a value in money specified on the gift card / voucher. When the money is paid by the customer, such a value is loaded onto the card electronically. PPIs issued by the applicant can be redeemed against purchase of any jewellery in any of the outlets of KJIL across India. This means that when the customer of bearer of the gift card wants to pay for some jewellery in KJIL's stores, they can pay with either cash or with gift voucher. This is seen in the sample sale invoices given by the applicant. "Payment instrument" as defined in para 2(g) of the Payment and Settlement Act 2007 means any instrument, authorization or order in any form, including electronic means to effect a payment- by a person to a system participant or by a system participant to another system participant. The system participant includes the issuer. In this case, the gift voucher/ gift card is an instrument squarely covered under the definition of "payment instrument" under Payment and Settlement Act 2007. It is not a claim to a debt nor does i....
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....n of "Goods" under CGST Act under Section 2(52), every movable property other than money and actionable claim is "Goods" under this definition. Now, movable property is not defined under CGST ACT but is available in General Clauses Act 1977 as below: Section 3 (26) of General Clauses Act 1977 -"Movable property" shall mean property of every description, except immovable property; Section 19) Immovable property.-"Immovable Property" shall include land, benefits to arise out of land, and things attached to the earth, or permanently fastened to anything attached to the earth. It is seen from the above, that any property other than immovable property is a movable property. In this case, the customer purchases the Gift voucher and card by paying the issuer. Whoever produces the voucher at their stores, they will be allowed to redeem it. The voucher has both a value and an ownership and is the property of whoever first purchases it and later whoever redeems it and it is movable. It is neither money nor actionable claim as discussed above. Hence, these gift vouchers/ cards issued by the applicant being 'vouchers' under the CGST /TNGST Act are "Goods" as per Section 2(....
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....s And Photographs and CTH 49119990 covers others. HSN Explanatory Notes to Chapter 4911 states 49.11 - Other printed matter, including printed pictures and photographs. 4911.10 - Trade advertising material, commercial catalogues and the like - Other 4911.91 - Pictures, designs and photographs 4911.99 Other This heading covers all printed matter (including photographs and printed pictures) of this Chapter (see the General Explanatory Note above) but not more particularly covered by any of the preceding headings of the Chapter. The paper vouchers, a sample of which was submitted, are printed matter and are not trade advertising material, hence covered under CTH 49119990. Chapter 8523 of Customs Tariff covers discs, tapes, solid-state non-volatile storage devices, "smart cards" and other media for the recording of sound or of other phenomena, whether or not recorded, including matrices and masters for the production of discs, but excluding products of chapter 37. CTH covers 8523 21 00 -- Cards incorporating a magnetic stripe and CTH 8523 52 covers "Smart Cards". 85.23 - Discs, (apes, solid-sta....
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.... under CTH 8523 21 00 or CTH 8523 52; In any a case, CTH 8523. 5.6 In the case of paper based gift vouchers classifiable under CTH 4911 the applicable rate is 6% CGST as per Sl.No. 132 of Schedule II of the Notification No. 1/2017-C.T.(Rate) dated 28.06.2017 and 6% SGST as per Sl.No. 132 of Schedule II of Notification Ms. No. II(2)/CTR/532(d-4)/2017 vide G.O. (Ms) No. 62 dated 29.06.2017 as amended. In the case of gift cards, the same are classifiable under CTH 8523 and the applicable rate is 9% CGST as per Sl.No. 382 of Schedule III of the Notification No. 1/2017-C.T.(Rate) dated 28.06.2017 and 9% SGST as per Sl.No. 382 of Schedule III of Notification Ms. No. II(2)/CTR/532(d-4)/2017 vide G.o. (Ms) No. 62 dated 29.06.2017. 6. The applicant has also sought ruling on Closed PPIs- issued through Third Party PPI issuers. Kalyan Jewellers Kerala is the 'Gift Card issuer' as per the agreement entered into by Kalyan Jewellers, Kerala with M/s. Quickcilver Solutions Pvt Ltd, Bangalore. By the agreement, the Gift cards are supplied to Quickcilver, who undertakes the marketing of these cards and activates them for various denomination and various articles like Gold coins/ bars, Gold....