In re Myntra Designs Pvt. Ltd. (GST AAAR Karnataka)
Decision of the Hon’ble Karnataka High Court dated 16-01-2023 in the case of M/s Premier Sales Promotions Pvt Ltd., holding that ‘vouchers’ are neither goods nor services is to be respected as the law applicable as on date until the decision is stayed or reversed by a higher court on an appeal by the Department. Hence until the jurisprudence on this issue reaches a finality, we respectfully follow the decision rendered by the High Court on the taxability of vouchers. Having thus said, we move to the point of eligibility of input tax credit on the vouchers intended to be purchased by the Appellant. As already stated above, the primary condition for eligibility to input tax credit is that there should be an inward supply of either goods or services or both on which tax is charged by the supplier. In this case, as held by the Karnataka High Court in the decision cited supra, the vouchers are held to be neither goods nor services and cannot be taxed to GST. Therefore, when the vouchers intended to be procured by the Appellant is neither goods nor service, the question of eligibility of input tax credit does not arise.
The Appellant has made detailed submissions to the effect that the vouchers are not provided to the customers ‘free of cost’; that although consideration is not explicitly mentioned, the same would be accounted for in the commission charged from the sellers and on which applicable GST would be discharged. They emphasised that the presence of an underlying consideration in provision of the voucher codes cannot be disputed although the same is not explicitly specified. In their defence, they have cited the example of a manufacturer who supplies parts under warranty; that the parts so supplied during the warranty period is given without any consideration but it does not mean that the parts are given free of cost; that the cost of the parts given under warranty are inbuilt in the cost of the manufactured product and the tax is paid on the main item. They relied on the Supreme Court decision in the case of Commissioner of Sales Tax vs M/s Prem Nath Motors (P) Ltd in this regard. In view of our findings in Para 14 above, we do not find it necessary to labour on this argument.
The Appellant has also made detailed submissions on why the vouchers cannot be termed as ‘gifts’ given to the customers. Again, we find that examining this aspect is of no relevance since we have already held that input tax credit is not eligible on an inward supply which is held by the High Court as being neither a supply of goods or service. Therefore, while we agree with the ultimate ruling given by the lower Authority that input tax credit is not available on the vouchers received by the Appellant, we modify the findings to arrive at this conclusion, in the manner discussed above.
We reject the appeal filed by M/s. Myntra Designs Pvt Ltd and uphold the Advance Ruling No.KAR ADRG 33/2022 dated 14-09-2022 while modifying the findings in the manner discussed in this order.
Also Read Order AAR: ITC not eligible to ‘Myntra’ on vouchers & subscription packages procured from third party vendors
