M/S Premier Sales Promotion Pvt Limited vs The Union Of India on 16 January, 2023

Outcome
The Writ Petition filed by M/S Premier Sales Promotion Pvt Limited was allowed. The orders passed by the Karnataka Authority for Advance Ruling (AAR) and the Karnataka Appellate Authority for Advance Ruling (AAAR), which held that vouchers are taxable as goods, were quashed. The High Court ruled that vouchers do not fall under the category of goods and services and are thus exempted from the levy of tax.

Core Issue
The core issue was whether Pre-paid Payment Instruments (PPIs) such as Gift Vouchers, Cash Back Vouchers, and E-Vouchers, supplied by the petitioner, are themselves chargeable to GST at the time of supply, or if they are merely instruments akin to money, and thus not leviable to tax, with tax only applicable when the underlying goods or services are redeemed.

Key Facts

• Petitioner's Business: M/S Premier Sales Promotion Pvt Limited (assessee) is a company engaged in procuring PPIs (vouchers) from issuers and supplying them to its clients for a specified face value.
• Voucher Usage: Clients then issue these vouchers to their employees (as incentives) or other beneficiaries (under promotional schemes) for use as consideration to purchase goods or services.
• Nature of Vouchers: The vouchers in question are semi-closed PPIs, meaning the specific goods or services to be redeemed are not identified at the time of issuance. They do not permit cash withdrawal and are issued with prior RBI approval.
• Previous Rulings: The Karnataka Authority for Advance Ruling (AAR) ruled that the supply of these vouchers is taxable as 'goods', with the time of supply governed by Section 12(5) of the CGST Act, 2017, and a specific GST rate. This ruling was affirmed by the Karnataka Appellate Authority for Advance Ruling (AAAR).

Arguments (Taxpayer vs Revenue)

• Taxpayer (M/S Premier Sales Promotion Pvt Limited):
  • RBI Master Direction recognizes PPIs as instruments for purchasing goods/services.
  • These vouchers are PPIs that do not specify the goods/services at issuance.
  • According to Section 12(4)(b) of the CGST Act, the time of supply should be the date of redemption when goods are not identifiable at issuance.
  • A voucher is an instrument, not goods or services, until it's used to discharge an obligation.
  • It can, at best, be considered an 'actionable claim' under Section 2(1) of the CGST Act, which is excluded from goods/services in Schedule-III.
  • The actual supply of goods or services occurs only upon redemption.
  • Vouchers have no intrinsic value; they represent the value of future goods/services. Levying tax on them is without legal authority and leads to multiple taxation.
• Revenue (The Union Of India):
  • The assessee would precisely know what is offered to the customer, implying the goods/services are identifiable.
  • The precedent of M/s. Kalyan Jewellers India was distinguishable on facts, as it involved Kalyan Jewellers and their customers directly, not an intermediary like the petitioner.

Court’s Reasoning

• The Court analyzed the definitions of "Money" under Section 2(75) and "Voucher" under Section 2(118) of the CGST Act, 2017.
• It noted that "Money" includes "any other instrument recognised by the Reserve Bank of India when used as a consideration to settle an obligation," and "Voucher" is defined as "an instrument where there is an obligation to accept it as consideration."
• The Court concluded that vouchers are "mere instruments accepted as consideration for supply of goods or services" and have "no inherent value of their own."
• Since vouchers are instruments and recognized by RBI as payment instruments, they fall under the definition of 'money' as per Section 2(75) of the CGST Act.
• The CGST Act explicitly excludes 'money' from the definition of 'goods' and 'services', and therefore, transactions in money are not leviable to tax.
• The Court found support in precedents:
  • Union of India Vs. Delhi Chit Fund Association (Delhi High Court) which held that a mere transaction in money is not a service and thus not chargeable to service tax.
  • Sodexo SVC India Private Ltd. Vs. State of Maharashtra (Supreme Court) which held that Sodexo Meal Vouchers cannot be treated as 'goods' for Octroi or LBT purposes, a principle the Court extended to GST.
  • M/s. Kalyan Jewellers India (AAAR), which, despite Revenue's arguments, was cited by the Court for its observation that "Voucher per se is neither a goods not a service. It is a means of payment of consideration."
• The Court emphasized that the vouchers are semi-closed PPIs where the underlying goods or services are not identified at the time of issuance. The transaction is essentially a pre-deposit, and the value is transacted only at redemption, not at the time of delivery of the vouchers.
• Therefore, the issuance of vouchers is akin to a pre-deposit or currency and not a supply of goods or services.

Statutory References

• Constitution of India: Articles 226, 227
• Companies Act, 1956
• Central Goods and Services Tax Act, 2017 (CGST Act):
  • Section 2(1) (Definition of 'actionable claim')
  • Section 2(75) (Definition of 'Money')
  • Section 2(118) (Definition of 'Voucher')
  • Section 12(4)(b) (Time of supply for vouchers where goods/services are not identifiable)
  • Section 12(5) (Time of supply as per AAR's ruling)
  • Schedule-III (Activities or transactions treated neither as supply of goods nor supply of services)
• Notification No. 1/2017-Central Tax(Rate) dated June 28, 2017: Entry No. 453 of Schedule 3 (Rate of GST as per AAR's ruling)
• RBI Master Direction: DPSS.CO.PD.No.1164/02.14.006/2017-18 (on issuance and operation of PPIs)

Precedents Cited

• Sodexo SVC India Private Ltd. Vs. State of Maharashtra, 2016 (331) ELT 23 (SC).
• M/s. Kalyan Jewellers India (Appeal No. AAAR/11/2021).
• Union of India Vs. Delhi Chit Fund Association, W.P. (C) 4512/2012 (Delhi High Court).