BI Worldwide India Pvt. Ltd. Vs Additional Director (Karnataka High Court)
Hon’ble Karnataka High Court has quashed a GST demand on the margin earned from the purchase and sale of vouchers/gift cards. The dispute arose when the petitioner, engaged in employee and customer engagement solutions, bought vouchers from issuers at discounted rates and sold them to corporate clients at higher prices on principal-to-principal basis. The Revenue argued that such activity constituted a taxable service. Referring to CBIC Circular No. 243/37/2024-GST (31.12.2024), the Court distinguished between two models:
(1) Principal-to-Principal trading, where pure trading of vouchers is neither a supply of goods nor services and is not subject to GST; and
(2) Commission-based distribution, where agents earn taxable commission/fees from voucher issuers.
The Court observed that that the petitioner operated on a Principal-to-Principal basis without providing marketing or promotional services to the issuer of vouchers, the Court held that the trading margin was outside GST’s ambit under Section 9(1) of the CGST Act, 2017. Accordingly, the Court set aside the show cause notice.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
Petitioner is before this court seeking for the following reliefs:
(a) Issue a writ of certiorari or writ in the nature of certiorari or any other appropriate writ or order or direction under Article 226 of the Constitution of India quashing the impugned show cause notice F. No.DZU/INV/C/GST/1652/2021/Pt.II/4048 dated 31.07.2024 bearing DIN 202407DNN000008171EO issued by the respondent No.1 enclosed at Annexure-A demanding CGST, KGST along with interest, penalty and personal penalty.
(b) hold that the margin earned by the petitioner in distributing (purchase and sale) of vouchers / gift cards is excluded from the levy of GST and accordingly, the petitioner is not liable to pay any CGST or KGST as proposed to be demanded in the impugned show case notice; and
(c) pass such further order(s) and other reliefs as the nature and circumstances of the case may require.
2. The petitioner is engaged in employee Engagement, customer engagement and providing channel loyalty solution for diverse corporate clients. In furtherance of the same, the petitioner purchases vouchers of different products of different brands and makes it available to its clients for distribution amongst the person that they choose to distribute.
