Supply of Vouchers are goods and liable to GST, hence taxable

In the matter of Premier Sales Promotion Pvt. Ltd [2022] 134 taxmann.com 73 (AAAR-KARNATAKA)

The Appellate Authority for Advance Ruling, Karnataka ruled that that the vouchers traded by the Appellant are goods and not actionable claims. Since, the supply of vouchers by the Appellant is a supply of goods in terms of Section 7 of the CGST Act.

This Advance ruling ruled that the 18% GST payable on the supply of Vouchers.

M/s Premier Sales Promotions Private Limited (hereinafter referred to as Applicant) is a Private Limited Company registered under Goods and Services Act, 2017.

The Applicant is involved in the business of providing Marketing Services. The nature of services provided to each customer depends on the requirement and depends on the tailored agreement with each customer.

The clients issue work orders to the Appellant from time to time for supply of vouchers having a pre-defined face value. The client issues such vouchers to their customers who in turn can redeem the vouchers at any of the specified merchants who have agreed to accept the vouchers as consideration for goods or services supplied by them.

The Appellant undertakes to procure several types of vouchers such as ‘gift vouchers’, ‘cashback vouchers’ and ‘open vouchers’ which are redeemable at e specified merchants. The Appellant enters into agreement with the merchants for the purchase of the vouchers which are in turn sold to their clients.

In order to obtain a ruling on the applicability of GST on transactions of sale of vouchers, the Appellant approached the Authority for Advance Ruling (AAR) seeking a ruling on the following question:

1)?????Whether the vouchers themselves, or the act of supplying them is taxable, and at what stage, for each of the three categories of transactions undertaken by the Appellant?

2)?????If the answer to the above is in the affirmative, what would be the rate of tax at which this would be taxable i.e what category would this be taxed under?

Thereafter the AAR ruled that the supply of vouchers is taxable and the time of supply in all three cases would be governed by Section 12(5) of the CGST Act, 2017 (hereinafter referred to as Act). Further The rate of tax on the supply of vouchers is 18% GST as per entry no. 453 of of Schedule III of Notification No. 01/2017-Central Tax (R) dated 28.06.2017.

Aggrieved by the ruling given by the AAR, the Appellant has filed appeal to Appellate Authority for Advance Ruling, Karnataka

The Applicant contented that interpretation of the lower Authority is erroneous in as much as it is contrary to the definition of “voucher” as per Section 2(118) of the CGST,

Further, that the AAR has failed to recognize the fact that supply of vouchers involves the obligation to supply certain goods or services at a later stage, as per the stipulation of RBI Guidelines since inception of the contract entered into between the Appellant and its customers.

The Appellant also submitted that the AAR has erred in classifying the vouchers as goods for the obvious reason that the vouchers are only instruments which carry along with them a promise to pay or promise to supply goods and services and the ultimate supply of goods or services happens only when the final customer makes use of such vouchers by following the procedures and conditions attached to it.

Therefore, that whenever the vouchers are exchanged between the supplier of e-vouchers and buyer of e-vouchers, no supply of goods or services happens.

It was also submitted that since, vouchers are a form of payment instruments the issue of payment instruments in India which is regulated by the Reserve Bank of India in terms of the Payment and Settlement Systems Act, 2007 (PSS Act) and the Guidelines issued thereunder. Hence not goods under the Act.

Appellate Authority for Advance Ruling, Karnataka on a conjoint reading of the Section 2(52), Section 2(102) and Section 7 of CGST Act the Appellate Authority stated that the money is outside the scope of GST. Further, the voucher in the hands of the Appellant, does not settle an obligation but rather creates an obligation thus, it qualifies as ‘money’. This occurs only when the voucher is redeemed. Therefore, the voucher in the hands of the Appellant who only trades vouchers cannot be termed as ‘money’.

The Appellate Authority for Advance Ruling, Karnataka observed that the Appellant is purely trading in vouchers.?The vouchers get transferred from the person who first purchases the voucher from the issuer to the ultimate beneficiary who redeems the voucher.

Therefore, the Appellate Authority states that the vouchers being traded by the Appellant are in the nature of goods.

Subsequently, as per the definition provided in Section 2(52) of the CGST Act, 2017, “Goods” includes “actionable claims”. However, SI.No 6 of Schedule III of the CGST Act, treats actionable claims other than lottery, betting and gambling as being neither a supply of goods nor a supply of services.

The Appellate Authority find that the vouchers are not a claim to any debt. However, the voucher is in the possession of the claimant at the time of the claim and hence it cannot be considered as actionable claim.

The Appellate Authority for Advance Ruling, Karnataka upheld the decision of the AAR and dismissed the case.

Conclusion:

In the case of Kalyan Jewelers India Ltd wherein it has been held that the gold voucher issued by Kalyan jewelries an instrument used as consideration to redeem gold jewelry at any of its outlets and hence is a type of money recognized by the RBI and cannot be considered as goods.

It is observed that the vouchers issued by Kalyan Jewelers are in the nature of closed PPIs which do not require the authorization of RBI. The issuer of the voucher and the supplier of the goods are one and the same.

Further, GST will be levied at the time of voucher issue, not at the time of actual service or redeeming, because the supply is regarded to have been made at the time of voucher issued.

As a result, in our opinion, there may be no GST consequences for the issue of vouchers unless the underlying goods or services are really delivered as consideration, and the payment received in exchange for the voucher is simply in the form of a deposit.

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