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TMI Blog2021 (12) TMI 1299X X X X Extracts X X X X X X X X Extracts X X X X ..... th Floor, Kasturba Road, Bengaluru 560001(herein after referred to as Appellant) against the Advance Ruling order No. KAR ADRG 37/2021 dated 30th July 2021. Brief Facts of the case: 3. The Appellant is a Private Limited Company involved in the business of providing marketing services in the area of sourcing and supply of E-Vouchers. 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. 4. 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 questio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of goods or services. The vouchers are thus consideration in full or part for the goods or services or both to be supplied at the time of redemption of the voucher by the beneficiary. When the voucher is defined as "consideration" for the purchase or supply of goods or services, it is fallacious to hold that the vouchers themselves are "goods" and are subject to levy of GST. The AAR has thus ruled that the "consideration" itself is "goods" and liable to tax. 6.3 They submitted that they are trading in payment instruments; that the RBI classifies payment instruments into three categories - closed system PPIs, semi-closed system PPIs and open system PPIs; that the vouchers issued by the Appellant would be either semi-closed or closed system PPIs, since open system PPIs are only issuable by banks; that according to the RBI Master Directions on the Issuance and Operation of Prepaid Payment Instruments, PPIS are defined as payment instruments which facilitate the purchase of goods and services against the value stored on such instruments; and Merchants are defined as establishments who have a specific contract to accept the PPIs issued by the PPI issuer (or contract through a payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder, cannot be issued by the issuer unless it is approved by the RBI; that in spite of this the AAR has held that the payment instruments supplied by the applicant to their clients, cannot be covered under the definition of 'money' at the time of supplying them; that they take on the colour of money only when it is used for payment of a consideration for the supply. They submitted that this 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 Act; that the RBI has considered the vouchers as payment instruments; that consideration itself cannot be held to be goods or services; that the AAR has failed to recognise 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 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 ultimat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be classified as goods; that when the voucher is treated as actionable claim, then the transactions of actionable claims are neither supply of goods nor supply of services in terms of SI.No 6 of Schedule III of the CGST Act. 6.8. The Appellant contended that the lower Authority has failed to recognize the fact that several clarifications have been issued by the CBIC with respect to taxation of vouchers; that vide FAQ dated 15th Dec 2018, the CBIC had clarified that the time of supply of voucher in respect of goods and services shall be (a) the date of issue of voucher, if the supply is identifiable at that point; or (b) the date of redemption of voucher in all other cases; that the same has also been clarified in the CBEC Flyer No 5 dated 1-1-2018; that the instructions and clarifications by the CBIC are binding on the Department. The Appellant also relied on the order of the Tamil Nadu Appellate Authority for Advance Ruling in the case of Kalyan Jewellers India Ltd - 2021 (50) GSTL 96 (AAAR-TN) wherein it was held that Voucher, being an instrument used as consideration to settle an application, is a type of money, as long as such instrument is recognized by the Reserve Ban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sociates wherein it was held that sale of lottery ticket is an actionable claim; that in their case, the voucher is akin to lottery ticket and hence the qualifies as an actionable claim and hence by virtue of entry Sl.No 6 of Schedule III of the CGST Act, the transaction of supply of vouchers being an actionable claim is neither a supply of goods or services. They also relied on the Supreme Court decision in the case of Sodexo SVC India Pvt Ltd where the Apex Court had examined the issue of vouchers and held that the meal vouchers issued by Sodexo are not 'goods'; that although the decision of the Apex Court was rendered in the context of Octroi and Local Body Tax, the analysis made by the Supreme Court on the nature of vouchers will apply even to their case. 7.1. On a specific query by the Member as to whether the Appellant is authorized by RBI to issue the voucher, the Advocate categorically clarified that they Appellant is not the issuer of the voucher and is also not authorized by RBI to issue any voucher; that the Appellant is merely trading in the vouchers issued by the issuer. Further, they also submitted that the provisions of time of supply of voucher as given in Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the supply of the underlying goods or services. The taxable event the redemption of the value of the voucher and the resultant supply of goods or services as stipulated therein. The Advance Ruling holding that the supply of vouchers is taxable as goods is thus contrary to the plain words of the definition of "voucher" in Section 2 (118) of the CGST Act, 2017. 7.4. The Appellant submits that voucher signifies assignment of beneficial interest or a right to claim the goods which are not in possession of the beneficiary, either actual or constructive. The Voucher by itself has no value. The Voucher assures the beneficiary the goods or services specified in it. It is a claim for beneficial interest in the goods or services assured in the voucher. In case the goods or services are not supplied at the time of redemption of the voucher, the client or beneficiary can claim the benefit assured in the voucher as a claim to a debt. The Voucher gives the beneficiary a specific right to the goods or services underlying it. Therefore, the vouchers answers to the definition of 'actionable claim" as defined in Section 2 (1) of the CGST Act, 2017 read with Section 3 of the Transfer of Prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ck vouchers and (iii) Multi option vouchers. These vouchers are purchased by the Appellant from entities who are authorized by the Reserve Bank of India to issue vouchers, on payment of a consideration and the vouchers are sold to their clients for a consideration. The clients of the Appellant distribute the Gift vouchers and Multi Options vouchers to their employees as gratification and the employee (beneficiary) uses the voucher as consideration to purchase goods or services or both from specified merchant outlets. In the case of cashback vouchers, the voucher codes are printed on the client's product packaging and any consumer purchasing the promotional product shall be eligible to receive a cashback of an amount equivalent to the value as mentioned in the voucher. The lower Authority has held that this activity of the Appellant in trading of vouchers is a supply in terms of Section 7(1)(a) of the CGST Act and it amounts to a supply of goods. The lower Authority has also held that the vouchers are not 'actionable claims' in as much as they are not debt and have an expiry period. The Appellant has assailed this finding on the grounds that the voucher by definition is a co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hdrawals. 11. PPIs can be in the form of various types of vouchers such as: 1. Paper based vouchers: Meal vouchers and Purchase vouchers. 2. Electronic based vouchers: E-com vouchers such as Paytm/Amazon vouchers. 3. Discount vouchers: Discount provided on specific items or all items offered by the seller to the buyer that are to be used at a later point of time. 4. Cash vouchers or Coupons: A piece of paper or a digital code that can be used in exchange for cash. It can be used in place of money. These are also known as gift vouchers as they can be gifted and used by a third party at a later point of time to purchase from the same supplier. 5. E-Wallets: Instruments where money can be loaded and used for payments online for purchase of goods or services. In the instant case, the Appellant is dealing with E-Gift vouchers, Cash back vouchers in E-wallets and electronic based multi options voucher. A reading of the RBI guidelines denotes that the transactions in vouchers can be of different types: * The issuer of the voucher and the supplier of the redeemed goods and/or services can be the same person. This is categorised as a closed PPI and does not require the authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sal made or agreed to be made for a consideration by a person in the course or furtherance of business" On a conjoint reading of the aforesaid provisions, it is reasonable to say that money per se has been kept out of GST. Therefore, any transaction in money as such does not qualify as a supply and does not fall within the purview of being exigible to GST. However, any service fee or by whatever name the same may be called for use of various forms of accepted legal tender will be subjected to GST as the case may be. What construes money under GST law? Section 2(75) of the CGST Act defines 'money' as follows: "2(75) money means the Indian legal tender or any foreign currency, cheque, promissory note, bill of exchange, letter of credit, draft, pay order, traveller cheque, money order, postal or electronic remittance or any other instrument recognised by the Reserve Bank of India when used as a consideration to settle an obligation or exchange with Indian legal tender of another denomination but shall not include any currency that is held for its numismatic value" The vouchers in question are undoubtedly payment instruments recognised by RBI. The question is however, wheth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who first purchases the voucher from the issuer to the ultimate beneficiary who redeems the voucher. Therefore, the vouchers qualify to be considered as movable property and hence are to be considered as 'goods'. 14. The Appellant has strongly relied on the Supreme Court decision in the case of Sodexo SVC India Pvt Ltd to drive home the contention that the vouchers are not 'goods'. We have gone through the said decision of the Hon'ble Supreme Court. At the outset we find that in the relied upon case, Sodexo was the issuer of meal vouchers and was authorized by the RBI to issue such vouchers. Secondly, the Supreme Court was examining the issue in the context of levy of Local Body Tax and Octroi whereby the said taxes were chargeable upon the entry of goods within the city limits for consumption, use or sale therein. For this purpose, the Court referred to the definition of 'goods' as given in Section 2 (25) of the Maharashtra Municipal Corporation Act under which the Municipal Corporation is entitled to levy and collect Local Body Tax and Octroi. The definition of 'goods' as per the said Act reads as "goods" includes animals" In this context, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by Kalyan Jewellers to their customers is treated as a supply of goods or service. Since there was no ruling given either by the TN AAR or the AAAR on a question which is similar to the situation before us, the decision of the TN AAAR has no relevance or persuasive value to the Appellant in this case. 16. We now come to the contention of the Appellant that the vouchers are in the nature of actionable claims. As per the definition provided in Section 2(52) of the CGST Act, 2017, "Goods" includes "actionable claims". However, Sl.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. Therefore, only lottery, betting and gambling shall be treated as actionable claims which are goods under GST. All other actionable claims shall not be treated as either goods or service. Section 2(1) of the CGST Act states that "actionable claim" shall have the same meaning as assigned to it in Section 3 of the Transfer of Property Act, 1882. Section 3 of the Transfer of property Act 1882 defines "actionable claim" as "a claim to any debt, other than a debt secured by mortgage of immovable pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ims, is incorrect as the same has been overruled by the Constitution Bench of the Supreme Court in the case of Sunrise Associates. We have gone through to the decision of the Supreme Court in the case of Sunrise Associates. The decision in Sunrise examined the dealers' contention that a lottery ticket was only a slip of paper or memoranda evidencing the right of the holder to share in the prize or the distributable funds and was merely a convenient mode for ascertaining the identity of the winner. The Court held that in Anraj the lottery ticket was held to be goods - not as a physical article but as a slip of paper or memorandum evidencing (a) the right to participate in the draw, and (b) the right to claim a prize contingent upon the purchaser being successful in the draw. Further, for the purpose of levy of sales tax, lottery ticket could be regarded as 'goods' properly so called insofar as it entitled its holder to take part in the draw. In other words, lottery ticket, to the extent it evidenced the right to claim the prize, was not 'goods' but an actionable claim and, therefore, expressly excluded from the definition of 'goods' under the sales tax la ..... X X X X Extracts X X X X X X X X Extracts X X X X
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