No GST is applied when Prepaid Payment Instrument coupons are issued

Fact and issue of the case

Heard Shri. G. Shivadass, learned Senior Advocate for the assessee and Shri. Jeevan J. Neeralgi, learned AGA for the Revenue.

Briefly stated the facts of the case are, assessee is a registered Company1 engaged in the transactions of procuring Pre-paid Payment Instruments of Gift Vouchers, Cash Back Vouchers and E-Vouchers from the issuers and supplying them to its clients for specified face value. Its clients issue such Vouchers to their employees in the form of incentive or to other beneficiaries under promotional schemes for use as consideration for purchase of goods or services or both as specified therein.

Assessee submitted an application2 dated February 23, 2021 before the Karnataka Authority for Advance Ruling, for a Ruling whether the Pre-paid Payment Instruments3 or vouchers themselves, or the act of supplying them is taxable, and at what stage, for each of the three categories of transactions undertaken by the assessee and if the transaction were liable to tax, under which category and what would be the rate of tax applicable?

The Advance Ruling Authority, vide Order4 dated July 30, 2021 has ruled that the supply of vouchers is taxable as goods and the time of supply in all the three cases would be governed by Section 12(5) of the Central Goods and Services Tax Act, 20175 and the rate of GST6 as per Entry No. 453 of Schedule 3 of Notification No. 1/2017-Central Tax(Rate) dated June 28, 2017. The assessee challenged the said order before Karnataka Appellate Authority for Advance ruling. The Appellate Authority has affirmed the order passed by the Advance Ruling Authority. Feeling aggrieved, the assessee has presented this writ petition.

Observation of the court

We have carefully considered rival contention and perused the records.

Undisputed facts of the case are, assessee is a Company engaged in the transaction of procuring PPIs of Gift Vouchers, Cash Back Vouchers and E-Vouchers from the issuers and supplying them to its clients for specified face value. The clients issue them to their employees in the form of incentive or to other beneficiaries under promotional schemes for use as consideration for purchase of goods or services or both as specified therein. Assessee receives orders for supply of e-vouchers wherein the assessee sources e-vouchers for such clients as per the orders received and acts as an intermediary between the assessee and the supplier of e-vouchers.

The argument of Shri. Shivadass in substance is, the voucher, when accepted shall be consideration or part-consideration for supply of goods or services or both and the voucher itself cannot be treated as goods or services.

Thus, the question that falls for consideration is, whether in the facts of this case, vouchers themselves are chargeable to tax at the time of supply or chargeable when goods and services are redeemed?