In re Kalyan Jewellers India Limited (GST AAR Tamilnadu)
1. Whether the issue of own closed PPIs by the ‘Applicant’ to their customers be treated as supply of goods or supply of service?
The Own closed PPIs issued by the Applicant are ‘vouchers’ as defined under CGST/TNGST Act 2017 and are a supply of goods under CGST/TNGST Act 2017
2. If yes, is the time of issue of PPI’s by the Applicant to their Customers is the time of supply of goods or services warranting tax liability?
The time of supply of such gift vouchers / gift cards by the applicant to the customers shall be the date of issue of vouchers if the vouchers are specific to any particular goods specified against the voucher. If the gift vouchers/gift cards are redeemable against any goods bought, the time of supply is the date of redemption of voucher.
3.If yes, what is the applicable rate of tax for such supply of goods or services?”
In the case of paper based gift vouchers classifiable under CTH 4911 the applicable rate is 6% CGST as per Sl.No. 132 of Schedule II of the Notification No. 1/2017-C.T.(Rate) dated 28.06.2017 and 6% SGST as per Sl.No. 132 of Schedule II of Notification Ms. No. II(2)/CTR/532(d-4)/2017 vide G.O. (Ms) No. 62 dated 29.06.2017 as amended. In the case of gift cards classifiable under CTH 8523 the applicable rate is 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.
Read AAAR Order:Time of supply of gift vouchers / gift cards under GST
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, TAMILNADU
Note: Any appeal against this Advance Ruling order shall lie before the Tamil Nadu State Appellate Authority for Advance Rulings, Chennai as under Sub-Section (1) of CGST Act / TNGST Act 2017, within 30 days from the date on the ruling sought to be appealed is communicated.
At the outset, we would like to make it clear that the provisions of both the Central Goods and Service Tax Act and the Tamil Nadu Goods and Service Tax Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the same provisions under the Tamil Nadu Goods and Service Tax Act.
M/s. Kalyan Jewellers India Limited 5th Cross, 100 Feet Road, Gandhipuram, Coimbatore, Tamil Nadu (herein after referred as ‘Applicant’ or `KJIL’) is a Public Limited Company registered under GST Act in TamilNadu vide GSTIN: 33AADCK6079K1Z8. They also have registered office at Sitaram Mill Road, Punkunnam, Thrissur, Kerala 680002. The Applicant is carrying on the business of Manufacturing and Trading of Jewellery Products in Tamil Nadu as well as across different states in India. The Applicant has sought Advance Ruling on the following questions : –
1. Whether the issue of Own Closed PPIs by the ‘Applicant’ to customers be treated as supply of goods or supply of services as defined under the provisions of the CGST / SGST Act 2017 and rules, notifications there on.
2. If yes, is the time of issue of Own Closed PPIs by the ‘Applicant’ to customers is the time of supply of goods or services warranting tax liability
3. If yes, what is rate of taxes applicable for such supply of goods or services as the case may be
4. If yes, whether the issue of PPIs by Third Party PPI Issuers subject to GST at the time of issue in their Hands
5. Whether the amount received by the ‘Applicant’ from Third party PPI issuers subject to GST
6. If No, GST collection at the time of sale of goods or services on redemption of PPIs i.e. own and from Third Party will be a sufficient compliance of the Provisions of the CGST Act
7. What is the treatment of Discount (the difference between Face value and discounted value) in the hands of issuer of PPI in case of third party PPIs. Whether the ‘Applicant’ will be liable to pay GST on this difference Value
The Applicant has submitted the copy of application in Form GST ARA – 01 and also submitted a copy of Challan evidencing payment of application fees of Rs.5000/- each under sub-rule (1) of Rule 104 of CGST Rules 2017 and SGST Rules 2017.
2. KJIL is a Manufacturer and Trader in Gold and other Jewellery items through their retail outlets and also online portal. KJIL, as part of sales promotion, introduced the facility of issuing different types of Pre-Paid Instruments ((herein after referred as PPI’s) to their customers through their retail outlets as well as engaging third party online portal. These PPIs are generally called as “Gift Vouchers / Gift Cards” in the trade Practice. The PPIs are subject to Payment and Settlement Act 2007 and also Master Directions and other relevant notifications/ circulars / communications issued by Reserve Bank of India or any other relevant authorities such as Issunace and Operation of Prepaid Payment Instrumets(PPI) dt 11.10.2017 issued by RBI.
2.1. The applicant dealt with the following PPIs both in electronic/digital and paper formats.
1. Closed System PPIs-on Its own
The applicant issued these to customers on receiving the face value as per the requirement of the customer. The customer or holder can redeem these in any outlet of the applicant stores across the country at the time of purchase of jewellery.
2. Semi Closed PPIs- through third party PPI issuers- co branded PPIs
The applicant has an agreement with Quick Silver Solutions Pvt Ltd (approved non – bank PPIs as authorized by RBI) where the third party issues PPIs at the retail outlet of the applicant. The issuer pays the applicant upfront an amount, called the discounted value (lower than the face value)and the third party issuer sells these to the general customer at Face Value. The general customer or holder of the PPIs can redeem these at the outlets of the applicants at Face Value against their jewellery purchase. The difference is an incentive for third party PPI issuers. There is no impact of discount effecting GST liability.
2.2 The Applicant stated that PPIs are actionable claims or equivalent to money and issuing of PPIs are not supply of goods or services under the CGST Act and hence it is not taxable. The sale or service affected at the time of redemption of such PPIs are supply and will be taxed at the rates prescribed for such goods. As per Section 2(1) of CGST Act 2017 “Actionable Claims” shall have the same meaning as assigned to it under the Section 3 of the Transfer of Property Act, 1882. Further, Clause-6 of the Schedule III to the CGST Act 2017 lists actionable claims as an activity which is neither a supply of goods nor supply of services. The Applicant has stated that these types of PPIs are in general practice in market and also various retail companies handle such PPIs in India. They are not collecting any GST on such PPIs while issuing. The Applicant in support of their claim and clarification sought for has filed copy of Reserve Bank of India’s Circular dated 11th October 2017, Distribution Agreement entered with the third party viz., M/s. Qwickcilver Solutions Pvt Ltd, Bangalore who issues PPIs [Gift Card/ Gift Voucher] on behalf of the Applicant through online portal and also sample copies of sale invoices, ledger accounts reflecting the PPI transactions, copy of payment terms.
3.1 The Authorized Representative of the Applicant was heard in the matter on 20.11.2018. They stated that PPI’s are covered under Payment and Settlement Systems Act 2007. Third Party PPI is governed by RBI whereas closed /own PPIs are not. They stated that PPI is an actionable claim under Transfer of Property Act where Civil courts recognize these as per the above Act.; They sell Own PPIs at retail store and online and are redeemed at face-value and has a time value for redeeming.; It is not goods or services.; Hon’ble Supreme Court in Sodexo Vs. Maharashtra, held that they are not goods. The applicant undertook to submit details of accounts, vouchers, Statement of accounts, Balance Sheet, Sample of Sale of PPI Invoice, Redeeming Invoice. They further furnished a written submission, wherein, inter-alia, it is stated that
> PPIs facilitate sales and also for business promotion,
> They issue Closed System PPIs which can be redeemed by their Customer to purchase Jewellery items only.
> They are in agreement with M/s. Qwickcilver Solutions Private Limited, Bangalore, a third party online portal, to issue PPIs to Customers who can redeem it with the ‘Applicant’ or any other identical outlets, which is called Semi-Closed System of Pre-Paid Instruments (PPIs).
> Features of three different Pre-Paid Instruments :
