Gift Vouchers and Cards are Actionable Claims, GST Applicable on the Date of Redemption u/s 12(4)(b) of CGST Act: Madras HC [Read Order]

A Single Bench of the Madras High Court has recently held that gift vouchers and gift cards are actionable claims and Goods and Services Tax ( GST ) is applicable on the date of redemption under Section 12(4)(b) of the Central Goods and Services Tax ( CGST ) Act.

A Writ Petition was filed under Article 226 of Constitution of India, for issuance of a Writ of Certiorari calling for the records of the impugned order so far as the finding that the time of supply of the gift voucher/PPI issued by the petitioner to its customers is at the point of issuance of voucher/PPI and quash the same, by Kalyan Jewellers India Ltd.

As a part of the sales promotion, the petitioner formulated a Scheme by issuing different types of Pre-Paid Instruments ( hereinafter referred to as PPI’s and/or/Gift Vouchers ). These PPI’s are known as “Gift Vouchers/Gift Cards” in the market ( hereinafter referred to as PPI’s and/or/Gift Vouchers ). These “Gift Vouchers” are sold both in its retail outlets as well as through online portals by engaging the services of third party service providers.

The following ruling was delivered in the Advance Ruling Application of the Jewellers, “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.

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.”

Aggrieved by the aforesaid order, the petitioner filed an appeal at the Appellate Authority for Advance Rulings ( AAAR ), “The time of supply of the gift vouchers/gift cards by the applicant to the customers shall be the date of issue of such vouchers and the applicable rate of tax is that applicable to that of the goods.”

Notably, The expression “Gold Voucher” was substituted with the expression “Gift Voucher” in the Impugned Order.

The specific case of the petitioner is that these Gift Vouchers/Gift Cards are “actionable claims” and therefore not liable to tax as they fall within the purview of the execution in Section 7(2) of the respective GST Enactments read with Schedule III to the respective GST Enactments.

It was submitted that as per Section 7(2) of the respective GST Enactments, these “ Gift Vouchers” are “actionable claims” within the meaning of Section 3 of the Transfer of Property Act, 1882 and since it is specified in the Schedule III, it is to be treated neither as a “supply of goods” nor as a “supply of services” and therefore the petitioner was not liable to tax at the time of its issuance to its customers.

Alternatively, it was the case of the petitioner that the petitioner can be taxed only at the time of actual sale of the merchandise i.e., at the time of redemption of the Gift Vouchers by a customer.

On the other hand, the counsel for the respondent submitted that PPI’s issued by the petitioner was nothing but a Pre-Paid Card Instrument /Voucher and was liable to tax under the machinery prescribed under Section 12(4)(a) of the respective GST Enactments.

It was also submitted that tax liability is on the goods to be delivered on a future date. However, tax was payable at the time of issuance of the “Gift Vouchers” as there was identification of the merchandise in the “Gift Vouchers” issued by the petitioner.

The Bench observed that, “There are distinct elements in the definition of “actionable claim” in Section 3 of the Transfer of Property Act. As the nomenclature suggest, an “actionable claim” is a “debt” or a “beneficial interest” in a movable property not in possession of the claimant, which the Court recognize as an affording ground for granting relief to a claimant. An “actionable claim” is assignable in terms of Section 130 of the Transfer of Property Act, 1882.”

It was also noted that, ““Gift Voucher/Card” thus acknowledges debt. Thus, “Gift Voucher/Card” is nothing but a “debt instrument”. It can be redeemed on a future date on its presentation towards ‘sale consideration’ for purchase of the merchandise from any one of the petitioner’s retail outlets.”

“The value of the “Gift Voucher/Card” is meant to be set-off towards payment for the sale of the merchandise traded by the petitioner. A customer or his or her donee is/are entitled to redeem the value in the “Gift Voucher/Card” towards sale consideration of purchase to be made by them from the petitioner’s outlet under the terms of the scheme under which it is issued. If the petitioner commits a breach or fails to allow such redemption, such customer would have right to enforce”, the bench further noted.

It was further observed that, “At the same time, it has to be clarified that if the “Gift Voucher/Card” are issued for a specified and identified goods, or for a merchandise of a particular value, tax is payable on such identified goods at the time of issuance of the “Gift voucher/ Card”, as there is supply of an identified good in view of Section 12(4)(a) of the respective GST Enactments.”

Thus, if the “Gift Voucher/Card” is issued for an identified goods/merchandise, tax is payable notwithstanding the fact that only a part of the sale consideration is/was received by the petitioner in advance at the time of issuance of the “Gift Voucher/Card”.

On the other hand, if the “Gift Voucher/ Card” was issued for any unspecified goods to be purchased on a future date from a whole range of products/goods/merchandise offered for sale by the petitioner, tax is payable on such “goods” or “merchandise” only at the time of sale i.e. at the time of redemption of “Gift Voucher/Card” in view of Section 12(4)(b) of the respective GST Enactments.

The bench went on to draw-up an illustration – For instance, a person may buy a voucher or a coupon as a “gift” of a specified goods of a specific value for being gifted to a donee. The donee, is merely required to collect the merchandise from the store by presenting the “Gift Voucher/Card” and then complete the sale by taking delivery of the goods. It will be a situation covered by Section 12(4)(a) of the respective GST Enactments.

Similarly if the goods are identified at the time of the issuance of the “Gift Voucher/Card”, GST is payable although full payment is not made and payments are made in installments and delivery is taken later. Here, the generation of invoice and delivery of the identified goods or merchandise or article is merely postponed to a future date i.e. on the date of production/presentation of “Gift Card/ Gift Voucher”.

Therefore, unless there a clear identity of the “goods” or “service” and its value is ascertained on the date of issuance of the “gift voucher”, question of taxing a future supply of an unspecified goods or service which is to take place on a future date is not contemplated under the Scheme of the respective GST Enactments. This is the true purport of Section 12(4) of the respective GST Enactments.

It was thus held that, “If the “Gift Vouchers/Cards” is for a specified item of jewellery of specified value, tax is payable at the time of its issuance, as there is supply( i.e transfer ) within in the meaning of Section 7(1-A) of the respective GST Enactments read with Sl.No.1(c) to the II Schedule to the respective GST Enactments. Therefore, tax is payable in view of Section 12(4)(a) of the respective GST Enactments at the time of issuance of such “Gift Vouchers/Cards”.”

The Bench also held, “ On the other hand, if there is no supply ie. no transfer within in the meaning of Section 7(1-A) of the respective GST Enactments read with Sl.No.1( c) to the II Schedule to the respective GST Enactments, time of supply will get postponed to the actual time of redemption of the “voucher” to a future date of sale of merchandise or such goods when such Gift Voucher/Card is presented by the customer at the Counter of the petitioner. The petitioner will be liable to tax on the date of redemption under Section 12(4)(b) of the respective GST Enactments.”

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