TMI Blog2024 (1) TMI 920X X X X Extracts X X X X X X X X Extracts X X X X ..... e redeemed on a future date on its presentation towards sale consideration for purchase of the merchandise from any one of the petitioner s retail outlets. The Gift Voucher/Card is a debit card. It is like a frozen cash received in advance and thaws on its presentation at the retail outlet for being set off against the amount payable by a customer for purchase of merchandise sold by the petitioner or the amount specified therein is to be returned to the customer as per RBI s Master Direction where a customer fails to utilize it within the period of its validity - Gift Voucher/Card is therefore an actionable claim within the meaning of Section 2(1) of the respective GST Enactments read with Section 3 of the Transfer of Property Act, 1882. Since Actionable claim is specified in Sl.No.6 in the Schedule III, no tax is payable on it. Gift voucher/Card issued by the petitioner qualify as actionable claim within the meaning of the definition of actionable claim in Section 3 of the Transfer Act, 1882 as incorporated in Section 2(1) of the respective GST Enactments - the view in the impugned order that there is no need to determine whether voucher is an actionable c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vices Act, 2017. 2. Relevant portion of the Impugned Order dated 22.06.2021 passed by by the second respondent reads as under:- 6. DISCUSSION FINDINGS 6.1 We have considered the submissions made by the Applicant in their application for Advance ruling. On perusal of the impugned order, it is noticed that typographical error has indeed occurred in Para 7.11 and needs correction. However, since the correction sought in the rectification application has no effect in enhancing the tax liability or reducing the amount of Input Tax Creditvis- -vis the impugned order, the requirement under proviso to Section 102 of the GST Act does not apply. The corrigendum as it stands after rectification is as follows: 6.2 The wordings Gold Voucher wherever it occurs in Para 7.11 of the Appeal order be replaced by Gift Voucher. 3. By the impugned order dated 22.06.2021, the second respondent has partly allowed the application filed for rectification of its order passed earlier on 30.3.2021 by substituting the words/expression Gold Voucher with Gift Voucher. The impugned order dated 22.06.2021 records that the change in the nomenclature will however have no bearing on the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of gift cards classifiable under CTH 8523 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. The questions raised at Sl.No.4,5,6 and 7 are not answered for the reasons that the said questions are not admitted as this authority does not have jurisdiction. 6. Aggrieved by the aforesaid order, the petitioner filed an appeal before the second respondent herein in A.R.Appeal No.01/2020/AAR. Vide order in Appeal No.AAAR/11/2021(AR) dated 30.03.2021, the second respondent had concluded as follows:- 7.9. To conclude, when a voucher is issued, though it is just a means of advance payment of consideration for a future supply, subsection (4) of section 12 and 13 determine the time of supply of the underlying good(s) or service(s). Voucher per se is neither a goods nor a service. It is a means for payment of consideration. 7.10. Therefore, there is no need to determine whether voucher is an actionable claim to arrive at a conclusion that it is neither a goods nor a ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he voucher is classifiable according to the nature of the goods or services supplied in exchange of the voucher earlier issued to the customer 8. In the light of the above, we rule as under: RULING The Order of the Advance Ruling Authority is modified to the extent as discussed in para 7.11 and 7.13 above as follows:- The time of supply of the gift vouchers/gift cards by the applicant to the customers shall be the date of issue of such vouchers and the applicable rate of tax is that applicable to that of the goods. The subject appeal is disposed of accordingly. [* Note: The expression Gold Voucher was substituted with the expression Gift Voucher in the Impugned Order] 7. The above order dated 30.03.2021 in A.R.Appeal No.01/2020/AAAR holds that the Gift Voucher issued by the petitioner was neither a supply of goods nor a supply of services. At the same time, concludes that the voucher would be taxable at the time of its issuance in view of Section 12 (4)(a) of the respective GST enactments. 8. Under Such circumstances, the petitioner filed a rectification application under Section 102 of the respective GST Enactments Act on 28.04 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... customer. The accounting procedure adopted by the petitioner was described before the said authority 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 are sold for cash and are treated as in terms of Money . There are two significant stages in Gift Vouchers which need to be considered when processing transactions as follows:- Sales : The Gift Vouchers/Cards are sold to the customers for cash and the business has an obligation to supply goods in specified future dates. Redemption : Customers can redeem the Gift Vouchers/Cards (at the face value) in return, for the products. When the Applicant sells Gift Cards/Vouchers to the value of Rs.1,500/- the deferred revenue journal entries reflected in the record are as follows: Amounting for Gift Voucher transaction Sales Account Debit Credit Cash/Bank Rs.1,500/- - Gift voucher liability Rs.1,500/- Total Rs.1,500/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the machinery prescribed under Section 12(4)(a) of the respective GST Enactments. 18. It is submitted that tax liability is on the goods to be delivered on a future date. However, tax was payable at the time of issuance of the Gift Vouchers as there was identification of the merchandise in the Gift Vouchers issued by the petitioner . 19. It is submitted that Section 12(4) of the respective GST Enactments specifically deals with supply of Vouchers as defined in Section 2(118) of the respective GST enactments and therefore, the Impugned Order of the second respondent-TNSAAAR does not fall for any interference. 20. It is submitted that PPI s / Voucher are not actionable claim as was argued by the learned counsel for the petitioner as they do not satisfy the definition of actionable claim in Section 3 of the Transfer of Property Act, 1882. 21. Therefore, it was submitted that the argument of the petitioner that the petitioner was outside the purview of GST levy in view of Section 7(2) of the respective GST enactment read with Schedule III was irrelevant. 22. The learned counsel for the respondent would further submit that the petitioner has to merely alter t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndicates that the amount paid at the time of its issuance was non-refundable. In Rs.10,000 Qwikcliver Voucher, there is no indication of Tax paid at the time of its issuance. The card is valid for a period of one year from the date of its issuance. It has a secret pin covered by a foil paper. It has to be scratched to ascertain the PIN at the time redemption for settling payment on a future date. 31. The terms and conditions of Owikcilver Gift Card reads as under:- Qwikcilver gift card is valid for 365 days from the date of issue. This Qwikcilver gift card expires on 01.12.2021. This Qwikcilver gift card is non-refundable . This Qwikcilver gift card can be adjusted against purchase of any jewellery across Kalyan Jewellers showrooms in India. Pan Card copy to be furnished for transactions above 2 Lakhs. If mode of payment is cheque, then Qwikcilver gift card is subject to clearance of cheque. Partial Redemption of this Qwikcilver gift card is not permitted. The card has to be physically produced at the time of redemption. All disputes are subject to jurisdiction of the Courts at Thrissur, Kerala. 32. To ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Payment Instrument (PPIs). Paragraph No.2.3 and 2.4 of the Master Direction dated 11.10.2017 reads as under:- 2.3-Prepaid Payment Instruments (PPIs) 2.4-Closed System (PPIs) PPIs are payment instruments that facilitate purchase of goods and services, including financial services, remittance, facilities, etc., against the value stored on such instruments. PPIs that can be issued in the country are classified under three types viz., (i) Closed System PPIs, (ii) Semi-closed System PPIs and (iii) Open System PPIs. These PPIs are issued by an entity for facilitating the purchase of goods and services from that entity only and do not permit cash withdrawal. As these instruments cannot be used for payments or settlement for third party services, the issuance and operation of such instruments is not classified as payment systems requiring approval/authorization by the RBI. 37. If the amount paid is non-refundable, the Gift Card/Voucher will not satisfy the requirement of Para 13.3 of the Master Direction dated 11.10.2017. Para 13.3 of the Master Direction dated 11.10.2017 clarifies that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rted to RBI separately. 13.7 The holders of PPIs shall be permitted to redeem the outstanding balance in the PPI, if for any reason the scheme is being wound-up or is directed by RBI to be discontinued. 40. Thus, there is no doubt that the Gift Voucher/Card issued by the petitioner is a Prepaid Payment Instruments (PPIs) within the meaning of the Master Direction dated 11.10.2017 of the Reserve Bank of India and the petitioner is bound to either allow its redemption against purchase or refund if it is not used before its expiry. I shall now refer to the provisions of the respective GST Enactments. 41. Section 2(21) of the TN VAT Act, 2006 and Section 2(j) of the TN Sales Tax Act,1959 defined the expression goods . These definitions specifically excluded the actionable claim from their purview. 42. In fact, most of the definition of Goods in the Sales Tax Enactments and the VAT Enactments in the Country that were in force earlier prior to the enactment of the respective GST Enactments, specifically excluded actionable claim from their definition. This was also noted by the Hon ble Supreme Court in Sunrise Associates. Vs Govt. of NCT,New Delhi and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se Act, 1897 instrument includes - all Central Acts and Regulations made after the commencement of this Act, unless there is anything repugnant in the subject or context, (a) every document, by which any right or liability is, or purports to be, created, transferred, limited, extended, extinguished or recorded; (b) a document, electronic or otherwise, created for a transaction in a stock exchange or depository by which any right or liability is, or purports to be, created, transferred, limited, extended, extinguished or recorded; and (c)any other document mentioned in Schedule I, (18) document shall include any matter written, expressed or described upon any substance by means of letters, figures or marks, or by more than one of those means which is intended to be used, or which may be used, for the purpose of recording that matter; 50. Definition of actionable claim in Section 2(1 ), goods in Section2(52) and voucher in in Section 2(118) in the respective GST Enactments are reproduced below for easy reference:- Section 2 :- In this Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 3 of the Transfer Act, 1882, can be dissected to be read as follows:- Actionable claims means a claim to any:- Debt; or beneficial interest in a movable property , not in actual or constructive possession of the claimant, Whether, such d ebt or beneficial Interest in a movable property be, existent, accruing, Conditional or contingent which the Civil Courts recognise as affording grounds for relief, 53. The exclusion in the definition of actionable claim can be understood as follows:- A Debt secured by: 1. Mortgage of Immovable Property; or is not an Actionable claim 2. Hypothecation of movable property; (or) 3. Pledge of movable property, 54. In the Educational Guide that was issued on 20.6.2012 by the Central Board of Indirect Taxes in the wake of sweeping changes brought to the Finance Act, 1994 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erty is a right or expectancy in a moveable property like right to receive income accruing from a moveable property. It may be noted that accrual of income from a moveable property could be in the nature of a consideration for a taxable service, e.g. a hiring fees or a license fee accruing on hiring or licensing of a moveable property. In such a situation the service being provided in relation to such moveable property would not be covered in the exclusion clause. It is only if the beneficial interest in such property is transferred to another person for a consideration that the activity of transferring the beneficial interest would be covered. 2.8.11 Would vouchers that entitle a person to enjoy a service, for example a health club, be an actionable claim? No. Such a voucher does not create a beneficial interest in a moveable property but only entitles a person to enjoy a particular service for a single or specified number of times. 2.8.12 Would recharge vouchers issued by service companies for enabling clients/consumers to avail services like mobile phone communication, satellite TV broadcasts, DTH broadcasts etc be actionable claims? No. Such rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al by the Hon ble Supreme Court in Kesoram Industries and Cotton Mills Ltd. v. Commissioner of Wealth Tax, AIR 1966 SC 1370. 62. The Hon ble Supreme Court in UOI Vs. Raman Iron Foundary, (1974) 2 SCC 231, was interpreting General Conditions of Contract between the parties. In para 9, the Hon ble Supreme Court observed as under:- 9. The first thing that strikes one on looking at clause 18 is its heading which reads: Recovery of Sums Due . It is true that a heading cannot control the interpretation of a clause if its meaning is otherwise plain and unambiguous, but it can certainly be referred to as indicating the general drift of the clause and affording a key to a better understanding of its meaning. The heading of clause 18 clearly suggests that this clause is intended to deal with the subject of recovery of sums due. Now a sum would be due to the purchaser when there is an existing obligation to pay it in praesenti. It would be profitable in this connection to refer to the concept of a debt , for a sum due is the same thing as a debt due. The classical definition of debt is to be found in Webb v. Stenton [(1883) 11 QBD 518] where Lindley, L.J., said: ...a deb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mits a breach or fails to allow such redemption, such customer would have right to enforce. 66. The amount acknowledged therein is refundable to the customer after the expiry of the period of its validity, if it is not used and/or redeemed by a customer against any purchase under the law, notwithstanding the terms of the contract extracted above in the beginning of this order in view of the RBI s master circular. 67. There is an obligation on the part of the petitioner to accept the amount specified in the Gift Voucher/Card issued by it for being set off towards consideration payable for purchase of merchandise traded by the petitioner in its retail outlets. 68. Similarly, if amounts paid are not credited into the account of the customer, after the expiry of the period of its validity, it would give a cause of action to such customer to recover the amount as per RBI's Master Direction referred to supra. 69. A right to approach a civil court to recover the amount paid is available under the Scheme as per RBI s Master Direction under which the petitioner issued such as Gift Voucher/Card as a Prepaid Instruments (PPI s). 70. If the petitioner either, a. fails ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r supply of services. 77. Therefore, the petitioner is not liable to pay tax on Gift Voucher/Card in view of in view of Section 7(2)(a) r/w Sl.No.6 to Schedule III of the respective GST Enactments. 78. Since Actionable claim is specified in Sl.No.6 in the Schedule III, no tax is payable on it. Gift voucher/Card issued by the petitioner qualify as actionable claim within the meaning of the definition of actionable claim in Section 3 of the Transfer Act, 1882 as incorporated in Section 2(1) of the respective GST Enactments. 79. Therefore, the view in the impugned order that there is no need to determine whether voucher is an actionable claim to arrive at a conclusion that it is neither a supply of goods nor a supply service in a way is partly correct. However, the ultimate conclusion arrived is not correct. 80. Suffice to state that the Gift Vouchers/ Card satisfy the definition of actionable claims within the meaning Section 3 of the Transfer of Property Act, 1882 and are as such not liable to tax by themselves. Only the underlying transactions are taxable. 81. Although, the petitioner has stated in the terms of the Scheme that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty in goods shall pass on a future date upon payment of full consideration as agreed, is to be treated as a supply of goods or service. 87. Thus, if the Gift Voucher/Card is issued for an identified goods/ merchandise, tax is payable notwithstanding the fact that only a part of the sale consideration is/was received by the petitioner in advance at the time of issuance of the Gift Voucher/Card . 88. If the sale of an identified merchandise of specified amount is concluded at the time of issuance of Gift Voucher/ Gift Card although full consideration is not paid and there is no delivery of merchandise, tax is still payable in terms of Section 12(4)(a) of the Act. This is the mechanism under Section 12(4)(a) of the respective GST Enactments. 89. On the other hand, if the Gift Voucher/ Card was issued for any unspecified goods to be purchased on a future date from a whole range of products/goods/merchandise offered for sale by the petitioner, tax is payable on such goods or merchandise only at the time of sale i.e. at the time of redemption of Gift Voucher/Card in view of Section 12(4)(b) of the respective GST Enactments. 90. Relevant portion of Section 12(4) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date of issuance of the gift voucher , question of taxing a future supply of an unspecified goods or service which is to take place on a future date is not contemplated under the Scheme of the respective GST Enactments. This is the true purport of Section 12(4) of the respective GST Enactments. 96. Incidentally, the Karnataka High Court in M/s. Premier Sales Promotion Pvt. Limited, vs. The Union of India, Ministry of Finance, Department of Revenue, North Block, New Delhi 110 001 2023(70) GSTL 345, held as follows:- 21. It is not in dispute that the vouchers involved in the instant petition are semi-closed PPIs in which the goods or services to be redeemed are not identified at the time of issuance. Vouchers are distributed to its employees or the customers which can be redeemed by them. These PPIs do not permit cash withdrawal, irrespective of whether they are issued by banks or non-banking Companies and they can be issued only with the prior approval of RBI. 22. In substance the transaction between the assessee and his clients is procurement of printed forms and their delivery. The printed forms are like currency. The value printed on the form can be transacte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /2011-ST dated 1.3.2011, it did not specifically deal with voucher, as an actionable claim was outside the purview of the definition of goods for the purpose of Section 65B(25) of the Finance Act, 1994 and definition of service in Section 66(44) of the Finance Ac, 1994 which was defined these two expressions for the first time with effect from 01.07.2012 vide Finance Act, 2012. 106. Therefore, the view of the Advance Ruling Authority dated 24.11.2019 vide its Order No.52/ARA/2019, that the time of supply of the Gift Vouchers/ Cards issued by the petitioner to the customers shall be the date of issuance of such vouchers irrespective of the nature of transaction and rate of tax is that applicable to that of the goods is not fully correct. 107. At the same time, the conclusion in para 7.9 of the impugned order dated 30.03.2021 that voucher per se is neither a goods or a service is correct in view of Section 7 r/w III Schedule to GST Enactments and Section 3 of the Transfer of Property Act, 1882 is correct. The conclusion that the Gift Card/Voucher per se is not taxable is correct. 108. In view of the above discussion, the conclusion of the 2nd Respondent in i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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