TMI Blog2018 (7) TMI 1421X X X X Extracts X X X X X X X X Extracts X X X X ..... validity date, these reward/payback point can no longer be redeemed/encashed by the end customer and the end customer loses any right over them. Also, as per the definition of "actionable claim", given under Section 3 of the Transfer of Property Act, no legal action can be taken by the end customer in connection with enforcing their right over redeeming these reward/payment points This implies that after expiry of their validity period, these reward/payment points are not "actionable claim". Consequently, the action of forfeiture of rewards/payment who validity period has lapsed, does not mean that actionable claim been transferred, as after expiry of validity period, these reward/payback points are no longer covered under the definition of "actionable claim". Thus, the provisions of Schedule III to CGST Act, 2017 also do not come into picture, under such circumstances. The money equivalent to these reward/payback points, i.e. issuance fee given by partners and lying with LSRPL, which is retained by LSRPL in the name of forfeiting reward/payback points is nothing but revenue of LSRPL coming from the respective "partners" which has been earned by them owing to the activities of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (NICE). The applicant is managing the customer loyalty programme for its clients/partners such as NICE, which is based on issuance of reward points, also known as payback points by the applicant to end customers. These reward/payment points have value of 0.25 INR each. 2. 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 made with a 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 is 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. 3. 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 loyally programme, end customers get reward/payment points. b) These r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n (East), vide letter No.3086 dt.22.03.18, submitted the requisite comments on both the above questions raised by the applicant, as under: (a) The applicant recovers the underlying value of 0.25 INR 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 IPA Act, 1882 comprises two types of claims: (a) a claim to unsecured details and (b) a 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 of enjoyment. It will not be actionable claim but a chose in possession, in the present case the pay back points are very much in the possession of the customers. Therefore, they cannot be te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is also to be noted that Schedule III to the CGST Act, 2017 provides for activities or transactions which shall be treated neither as supply of goods nor as supply of services. Point 6 in schedule III includes actionable claims other than lottery, betting and gambling. Therefore, such actionable claims which are not lottery, betting, gambling, though are goods under Section 2(52) of the CGST Act, but are excluded from levy of GST in terms of Schedule III to CGST Act. 9. Rewards points earned by the end customers for purchase of products of partners to loyalty programme are indeed actionable claim . However, the question arises that, when these reward/payback points are not redeemed by the customer for the reasons that their validity period has expired, do such reward points continue to be actionable claim? 10. In this regard, it is observed that after the expiry of validity date, these reward/payback point can no longer be redeemed/encashed by the end customer and the end customer loses any right over them. Also, as per the definition of actionable claim , given under Section 3 of the Transfer of Property Act, no legal action can be taken by the end customer in conn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect of supply of goods and services or both, at the time of, or before delivery of goods or supply of services. In the instant case, retention of issuance fee after forfeiture of reward/payment points, amounts to charging of amount equivalent to amount retained as issuance fee for the services which have been provided by LSRPL, to its partners. ADVANCE RULING UNDER SECTION 98 Of THE CGST/HGST ACT. 2017 14.1 The value of points forfeited of the applicant on which money had been paid by the issuer of points on account of failure of the end customers to redeem the payback points within their validity period would amount to consideration received in lieu of services being provided by LSRPL to its clients and thus would be outside the scope of being considered as 'actionable claim' other than lottery, gambling or betting and therefore would qualify as supply of services in terms of Section 7 of the Central Goods and Services Act, 2017/Haryana Goods and Services Act, 2017 and therefore would be within the scope of levy of GST. 14.2 The value of points forfeited of the applicant on which money has been paid by the issuer of points on account of failure of the end cus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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