Tvl. Kalyan Jewellers India Ltd. Vs Union of India (Madras High Court)
This recent Judgement passed by the Hon’ble Madras High Court has to an extent resolved the anomaly with respect to taxability of vouchers under the GST regime.
1. In the captioned matter, the petitioner who is into the business of manufacture and sale of ornaments through its retail outlet, as a part of sales promotion, has issued different types of Pre-paid instruments (hereinafter referred to as PPI’s and/or Gift Vouchers).These gift vouchers are sold in its retail outlets as well as through online portals.
The above-referred judgement clarified the following issues:
- Whether such PPI’s can be treated as supply of goods or supply of service; and
- The determination of time of supply of Gift Vouchers under Section 12 (4) of the CGST Act, 2017.
2. In relation to the said issue, the Appellate Authority for Advance Ruling (AAAR) on modifying the order passed by the Authority for Advance Ruling (AAR), held that the “Gift Voucher” issued by the petitioner was neither a supply of goods nor a supply of service. Hence, it is not relevant to determine whether a voucher is actionable claim. It further concluded that, in view of Section 12 (4) (a) of the CGST Act, 2017, the voucher would be taxable at the time of its issuance. Background of the case:
Aggrieved by the order of AAAR; the petitioner had filed this writ.
Summary of the judgement pronounced by HC:
1. In the above matter, reliance was made on the Master Direction issued by the Reserve Bank of India, which defined “Pre-paid Instruments” and “Closed system PPI’s”. Since, the petitioner here, issued PPI’s for facilitating the purchase of goods and services from its own brand only and met all parameters of Closed System PPI’s, therefore it was held by the Hon’ble Court that there was no doubt that the “Gift Voucher” issued by the petitioner was a “Closed system PPI”.
2. The Hon’ble High Court, after detailed analysis of various definitions i.e. definition of goods, Actionable claim, voucher, instrument and document held that ‘Gift Voucher’ being a debt instrument shall qualify as an ‘actionable claim’, which constitutes neither supply of goods nor supply of services. Consequently, in light of Section 7(2) of the CGST Act, 2017 read with Sr.No.6 to Schedule III of the CGST Act; petitioner is not liable to pay tax on “Gift Voucher/Card”
3. Further, while responding to the issue of determination of time of taxability of Gift Vouchers, it was held by the Hon’ble High Court that–
If the Gift Vouchers were issued for specified and identified goods, or for specified value of merchandise, tax shall be payable at the time of issuance in view of Section 12 (4) (a) of the CGST Act since the supply (i.e. transfer) is occurring at the time of issuance.
4. Whereas, on the other hand if the goods or services were unidentified at the time of issue, the time of supply would get postponed to the actual time of redemption of the Gift Voucher to a future date when the sale of merchandise or goods will occur; in view of Section 12 (4) (b) of the CGST Act, 2017.
5. It was also held that, Customer can rightfully approach the Civil Court in case the petitioner –
