• Kandivali West Mumbai 400067, India
  • 022 39167251
  • support@email.com
September 17, 2022

ITC is not applicable to ‘Myntra’ vouchers and subscription packages purchased from third-party vendors

by CA Shivam Jaiswal in GST, Legal Court Judgement

ITC is not applicable to ‘Myntra’ vouchers and subscription packages purchased from third-party vendors

Facts and Issue of the Case

The applicant, is a company registered under Companies Act 1956, having its registered office at AKA Tech Park, 3rd Floor, 7th Mile, Krishna Reddy Industrial Area, 1-losur Road, Bengaluru-560068 and also registered under the provisions of CGST/KOST Act 2017. The applicant is a major Indian fashion e-commerce company & owns an e-commerce portal (www.myntra.com); engaged in the business of selling of fashion and lifestyle products through the portal, The suppliers of such products, intending to sell their products through the applicant’s portal list them on the portal and sell them to customers, who place their order using the applicant’s portal. Once order is placed by the customer, the applicant collects money from them towards the purchase of the said order through its portal in the capacity of an e-commerce portal operator and settles the amount payable with the supplier of the said order within a specified period.

The Applicant, in order to incentivise the customers visiting the portal / e- commerce platform, proposes to run a loyalty program, by way of issuing points to the customers on the basis of purchases, effected by the customers from various sellers on the said platform. The participation in the proposed loyalty program will be on meeting the pre-defined eligibility criteria laid down by the applicant and the same will be subject to acceptance of the applicant’s terms and conditions. Further the customer will be bound by the said terms and conditions and any changes or modifications to the same by participating in the said program.

The loyalty program is sought to be introduced with an object of increasing customer base of the applicant’s platform which will lead to increased footfall and sales through the said platform and thus the said loyalty program will directly impact and enhance the amount of commission earned by the Applicant in the course of their business.

Observation by the Court

The court would like to make it clear that the provisions of COST Act, 2017 and the KGST Act, 2017 are in pari-materia and have the same provisions in like matters and differ from each other only on a few specific provisions. Therefore, unless a mention is particularly made to such dissimilar provisions, a reference to the COST Act would also mean reference to the corresponding similar provisions in the KGST Act.The court have considered the submissions made by the applicant in their application for advance ruling. The court  also considered the issues involved on which advance ruling is sought by the applicant and relevant facts along with the arguments made by the applicant & the submissions made by their learned representative during the time of hearing.

The Applicant proposes to run a loyalty program where loyalty points will be awarded on the basis of purchase made by the customer on their e-commerce platform. The participation in the said program will be based on meeting the pre-defined eligibility criteria and subject to acceptance of the terms and conditions by the customer. The applicant, through their portal, would make the vouchers and subscription packages available to those customers who wish to redeem the loyalty points accumulated by them and the applicant will not receive any monetary consideration from the said customers. Further the loyalty points are non-transferable, can’t be converted into cash and can’t be used in place of cash. The applicant would be procuring the vouchers 8E, subscription packages, on payment of applicable GST, from third party vendors who would be classifying their supply under SAC 9983 as ‘other professional, technical and business” service.

The applicant primarily contends that they fulfill all the required conditions prescribed under Section 16(1) of the COST Act 2017 and the inward supply, i.e. procurement of vouchers 86 subscription packages, is classified as a service and thus Section 17(5)(h) is not applicable 8E, thereby allowing the customers to redeem the loyalty points earned for vouchers 86 subscription packages can’t be termed as a ‘gift’ and hence the applicant is eligible to claim the ITC of GST paid on such procurement.

Now the court  proceed to examine as to whether the applicant is eligible to the input tax credit in terms of Section 16(1) of the Act, ibid, on the vouchers and subscription packages procured by them from third party vendors and supplied to customers participating in the loyalty program against the loyalty points earned. From the above it can be seen that input tax credit is an entitlement to a registered person which can be taken subject to such conditions and restrictions as may be prescribed. In this regard it is seen that sub-section (5) of Section 17 prescribes that input tax credit shall not be available in respect of certain supplies. Thus the issue before us is to decide whether the inward supply i.e. the vouchers merits classification as ‘goods’ or ‘service’ and if they are goods, whether they were disposed of by way of gift or otherwise.

It can be seen from the loyalty program that the applicant, on the basis of a particular transaction purchase by the customer through their e-commerce platform and subject to acceptance of the terms and conditions of the applicant by the customer, allows the customer to earn loyalty points. The applicant in the said transaction recovers the full amount from the customer and gives the loyalty points free of cost. Further the said loyalty points, in the applicants own admission, do not have any monetary value, are non-transferable and cannot be converted to cash. The redemption of loyalty points, admittedly involves no flow of consideration from the customer.


The applicant is not eligible to avail the input tax credit, in terms of Section 16 of the CGST Act 2017, on the vouchers and subscription packages procured by the applicant from third party vendors that are made available to the eligible customers participating in the loyalty program against the loyalty points earned / accumulated by the said customers, as the input tax credit is not available in terms of Section 17(5)(h) of the CGST Act 2017.


Enter your email address:

Subscribe to faceless complainces

Please follow and like us:
Pin Share
Follow by Email