2024 (10) TMI 1489 - AAAR - GST

Taxability of Vouchers themselves or the act of supplying them - GST rate of tax and the value of supply at which this would be taxable - Appellant is not the issuer of the voucher but is the third party who buys and sells the vouchers. What is a Voucher? - HELD THAT - Section 2 (118) of GST Act defines voucher means an instrument where there is an obligation to accept it as consideration or part consideration for a supply of goods or services or both and where the goods or services or both to be supplied or the identities of their potential suppliers are either indicated on the instrument itself or in related documentation including the terms and conditions of use of such instrument. Thus as per GST laws a voucher is an instrument that entitles the holder to receive goods or services or a discount on goods or services upon redemption. Vouchers are instruments representing value to facilitate a supply. Vouchers include gift cards discount coupons prepaid instruments and similar items. Is Voucher goods or service? - In the instant case the Appellant purchases the vouchers by paying a consideration to the issuer. The vouchers are also sold to the clients of the Appellant for a consideration. The vouchers have both a value and an ownership which is transferred by the issuer of these vouchers to the appellant and then to the ultimate beneficiary who redeems the voucher. The vouchers qualify to be considered as movable property and the goods . Whether the vouchers are in the nature of actionable claims? - Actionable claim qualifies as goods . Actionable claim is defined to have the same meaning as assigned to it in section 3 of the Transfer of Property Act 1882. Thus actionable claim is a claim to an unsecured debt or a claim to any beneficial interest in movable property that is not in the possession of the claimant. Transactions/activities in actionable claims are kept outside the ambit of GST except for the following claims betting casinos gambling horse racing lottery and online money gaming. Actionable claims are considered goods under the CGST Act but have some special rules. They are only taxed when transferred sold or given away for a price. This means that GST is not charged on the debt itself but only on the supply of the right to recover the debt. This is because actionable claims are neither a supply of goods nor services as per Schedule III of the CGST Act. GST liability arises when the claim is assigned sold or disposed of for consideration. In case of Vouchers it has already been observed that Voucher by itself is a movable property and hence constitutes goods. Since the Voucher is in the possession of the claimant at the time of claim hence it cannot be considered as actionable claim. Here the appellant is involved in trading of vouchers for a consideration in the course of furtherance of business. Though profit motive is not a requisite for the term supply yet it is a fact that the Appellant is selling these vouchers at a profit. Thus the impugned transaction amounts to supply of goods in terms of Section 7(1) (a) of the CGST Act 2017. Appellant bought a gift card worth Rs. 1000/- from XYZ Company at a discount of 3% - If the coupons/vouchers represent a right to receive goods or services at a future date and the trading activity involves the transfer of these rights without any physical goods being exchanged it has to be considered a service since as per the GST law the activity of providing or transferring a right to use goods or services is service. Since coupons/vouchers are essentially instruments granting such a right trading in them falls under the service category. For an intermediary who arranges the distribution or sale of discount vouchers and earns a commission (in the form of discount in the instant case) the GST liability is determined based on the nature of the service provided-facilitating the distribution of vouchers and earning a commission fee/discount. In the instant case the appellant is engaged in trading of Vouchers/coupons and getting commission in the form of discount on such services which are taxable. Thus trading in Vouchers/coupons being a service is the taxable event where the time of supply is when the Vouchers/coupons are traded or sold. The value of service shall be the margin between the buying and selling price of the coupons. Order (i) We set aside the impugned ruling given vide UP ADRG - 43/2024 dated 20.02.2024 passed by the Authority for Advance Ruling against the Appellant. (ii) The Supply of Gift cards/ Vouchers/ pre-paid Vouchers are taxable as supply of goods and the time of supply shall be decided as per Section 12 (4) of the CGST Act 2017. (iii) We hold that GST is applicable on the commission/discount earned in the trading of Vouchers/Coupons by the appellant and the time of supply will be the time when the Vouchers/Coupons are traded or sold. The value of service shall be the margin between the buying and selling price of the Vouchers/Coupons. The Ruling given hereinabove applies to the unique facts and circumstances of the appellants matter in appeal and is based upon the submissions and evidences made available in this regard. This ruling is valid only within the jurisdiction of Authority for Advance Ruling Uttar Pradesh in terms of the provisions of The Central Goods and Services Tax act 2017 and Uttar Pradesh Goods and Services Tax Act 2017.

Summary

Issues Involved:

1. Taxability of Vouchers and the stage at which they are taxable.
2. Rate of tax and value of supply for Vouchers.
3. Delay in filing the appeal.
4. Classification of Vouchers as goods or services.
5. Applicability of GST on the commission/discount earned in trading Vouchers.

Detailed Analysis:

1. Taxability of Vouchers and the Stage at Which They Are Taxable:

The primary issue was whether the supply of Vouchers by the appellant is taxable and at what stage. The Authority for Advance Ruling initially held that the supply of Vouchers is taxable at 9% CGST and 9% UPGST under residual entry no. 453 of the Third Schedule of Notification No.01/2017-Central Tax (Rate) dated 28.06.2017. However, upon appeal, the Appellate Authority found that the supply of Vouchers should be considered as a supply of goods and the time of supply should be determined as per Section 12(4) of the CGST Act, 2017. This section specifies that the time of supply shall be the date of issue of the voucher if the supply is identifiable at that point, or the date of redemption in all other cases.

2. Rate of Tax and Value of Supply for Vouchers:

The appellant contended that the Vouchers are in the nature of "money" and thus excluded from the definition of "goods" and "services," making them non-taxable. However, the Appellate Authority determined that Vouchers are movable property and qualify as "goods." The value of the supply of Vouchers is to be decided as per Section 15 of the CGST Act, 2017. The ruling clarified that the value of service should be the margin between the buying and selling price of the Vouchers/Coupons.

3. Delay in Filing the Appeal:

The appellant filed the appeal beyond the stipulated 30 days from the date of communication of the advance ruling order. The delay was attributed to the non-uploading of the order on the portal, leading the appellant to physically procure the order from Lucknow. The Appellate Authority, after considering the reasons provided by the appellant, condoned the delay under the proviso to Section 100(2) of the CGST Act, 2017, which allows for an extension if the appellant was prevented by a sufficient cause from presenting the appeal within the prescribed period.

4. Classification of Vouchers as Goods or Services:

The Appellate Authority examined whether Vouchers are classified as goods or services. The Authority concluded that Vouchers are considered "goods" because they are movable property with both value and ownership transferred from the issuer to the appellant and then to the ultimate beneficiary. The Authority also noted that Vouchers do not qualify as "money" since they cannot be used by the appellant to settle an obligation. Furthermore, Vouchers are not actionable claims as they are in the possession of the claimant at the time of claim.

5. Applicability of GST on the Commission/Discount Earned in Trading Vouchers:

The appellant argued that the trading of Vouchers should not attract GST. However, the Appellate Authority held that trading in Vouchers/Coupons is a taxable event under GST. The trading of Vouchers amounts to a supply of goods, and the GST is applicable on the commission or discount earned by the appellant during such trading. The time of supply is when the Vouchers/Coupons are traded or sold, and the value of service is the margin between the buying and selling price.

Conclusion:

The Appellate Authority set aside the previous ruling by the Authority for Advance Ruling, determining that the supply of Gift cards/Vouchers/pre-paid Vouchers is taxable as a supply of goods. The time of supply is to be decided according to Section 12(4) of the CGST Act, 2017. GST is applicable on the commission/discount earned in trading Vouchers/Coupons, with the value of service being the margin between the buying and selling price. This ruling is specific to the facts and circumstances of the appellant's case and is applicable within the jurisdiction of the Authority for Advance Ruling, Uttar Pradesh.