TaxTMI 
TaxTMI 
TaxTMI 
2020 (1) TMI 30
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....ilNadu 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 PPIs i.e. own and from Third Party will be a sufficient compliance of the Prov....
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....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 11th 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 the Applicant through online portal and also sample copies of sale invoices, ledger accounts reflecting the PPI transactio....
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....ndents (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 Payment and Settlement Act 2007. On the Accounting procedure, it is submitted as follows: * Gift Vouchers are sold by a business concern to customers to allow them to purchase the products on a future date. The Cards ar....
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....cant 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 defined under Clause 6 of the Schedule III to the CGST/SGST Act, 2017 the PPIs are excluded from the levy of GST, as it is a kind of actionable claim. * As there is no element of manufacturing process involved in the scope for the levy of Central Excise Duty was absent, hence Central Excise not levied on this kind of Vouchers (PPIs). * The levy of Octroi o....
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....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 part of sales promotion, introduced the facility of different types of Gift Vouchers/ Gift Cards as Prepaid Payment Instruments (PPI) to customers through its retails outlets, online portals and third party online portals subject to Payment and Settlement Act 2007 and Master Directions and other relevant notifications/ circulars / communications issued by Reserve Bank of India or any other relevant authorities. 4.1 The Payment and Settlement Act 2007 defines "payment system" as a system that enables payment to be effecte....
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....s 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 issued as cards or wallets and not in paper form. Issuer is permitted to issue PPIs through their authorized outlets or authorized / designated agents subject to condition that the issuer shall be responsible for all the PPIs issued by the authorized agent and issuer is responsible as principal for all acts of the agent. In case of cobranding arrangements, the agreement between them shall indicate who is the PPI issuer. The PPI issuer is responsible for all acts of the cobranding partner and the customer related aspects. The PPI issuer can co-brand such instruments with name/ logo of the company whose custo....
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....IL 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 depending on the value of actual load value of the gift cards sold to the customers for gold and diamond jewellery vouchers. The difference amount of the total load value and the service fee is to be paid by qwikcliver to KJIL, Kerala. From the above, it is seen that KJIL is selling the PPIs i.e. Gift vouchers/ cards to the customers directly at its stores. It alongwith its distinct persons in Kerala is also selling these PPIS through the distribution network of Qwikcilver both online and offline. However, even in the second case the PPI issuer as defined in the Payment and Settlement Act 2007, is only KJIL, Kerala and the gift vouchers can only be redeemed in the stores owned by the applicant. Qwikclive....
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....e 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 made or agreed to be made for a consideration by a person in the course or furtherance of business; (b) import of services for a consideration whether or not in the course or furtherance of business; (c) the activities specified in Schedule I, made or agreed to be made without a consideration; and (d) the activities to be treated as supply of goods or supply of services as referred to in Schedule II. (2) Notwithstanding anything contained in sub-section (1),- (a) activities or transactions specified in Schedule III; or (b) such activities or transactions undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities, as may be notified by the Government on the recommendations of the Council, ....
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....nt 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 it give a beneficial interest in any movable property to the bearer of the instrument. In fact, if the holder of the gift card/ voucher loses or misplaces it and is unable to produce it before the applicants stores before the time limit specified on the card/ voucher, the instrument itself becomes invalid. Then the customer cannot use it to pay for any goods. Thus it is not an actionable claim as defined under Transfer Of Property Act. It is only an instrument accepted as consideration / part consideration while purchasing the goods from the issuer and the identity of the supplier is established in the PPI. Therefore the PPIs under consideration squarely falls under the definition of 'Voucher' as defined in section 2(118) of CGST Act. It is further observed that the definition of 'Voucher' has been added to the Act after discussion in the GST Council, while approving the draft Acts. ....
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....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(52) of CGST and TNGST Act. Further, when the vouchers are purchased by the customers there is a consideration, the face value which is paid; it is for the furtherance of business of the applicant as the customer or bearer will in future definitely buy jewellry from the applicant. Hence, supply of voucher qualifies as "supply" under Section 7 of the CGST Act / TNGST Act, specifically as supply of goods. It is seen that. The time of supply of goods is specified under Section 12 of CGST/TNSGST Act, and the time of supply of vouchers is specified in Section 12(4); clearly indicating that vouchers are goods under CGST ACT. 5.4 The PPIs under consideration are 'Vouchers' which are given for use in the retail outlets of KJIL for purchase of jewellery, i.e. goods and therefore the time of supply is governed by the provisions under Section 12 (4) of the CGST Act, which states as follows: (4) In case of supply of vouchers by....
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....xcluding 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-state noru-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. - Magnetic media 8523.21 - - Cards incorporating a magnetic stripe 8523.29 - - Other - Optical media: 8523 41 - - Unrecorded 8523.49 - - Other - Semiconductor media: 8523.51 - - Solid-state non-volatile storage devices 8523.52 - - "Smart cards" 8523.59 Other 8523.80 - Other This heading covers different types of media, whether or not recorded, for the recording of sound or of other phenomena (e.g., numerical data; text; images, video or other graphical data; software). Such media are generally inserted into or removed from recording or reading apparatus and may be transferred from one recording or reading apparatus to another. The media of this heading may be presented recorded, unrecorded, or with some pre-recorded information, but capable of having more inform....
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....on and various articles like Gold coins/ bars, Gold jewellery, diamond jewellery. The questions on which Advance Ruling is sought and related to such Third party PPI issuers are as under: 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 PPIs i.e. own and from Third Party will be a sufficient compliance of the Provisions of the CGST Act 7. What is the treatment of Discount (the difference between Face value and discounted value) in the hands of issuer of PPI in case of third party PPIs. Whether the 'Applicant' will be liable to pay GST on this difference Value In this case it is seen that Qwikcilver is the supplier of the vouchers to customers and Qwikcilver also supplies their services to KJIL, Kerala. The above questions pertain to these two supplies. Kalyan Jewellers, Kerala is a distinct entity from KJIL and Qwikcilver is based in Bangalore. This Advance Ruling Authority does not have Jurisdiction over the activity undertaken by th....