Tvl.Kalyan Jewellers India Ltd vs Union Of India on 27 November, 2023

Outcome**
The Madras High Court partly allowed the writ petition, quashing the impugned order of the Tamil Nadu State Appellate Authority for Advance Ruling (TNSAAAR) dated 22.06.2021 (read with 30.03.2021) to the extent it was inconsistent with the High Court's findings. The Court held that Gift Vouchers/Cards are "actionable claims" and therefore not taxable per se. The taxability arises only from the underlying supply of goods or services. The time of supply for such vouchers depends on whether the underlying supply is identifiable at the time of issuance of the voucher.

2. Core Issue
The core issue was to determine the GST implications of Gift Vouchers/Pre-Paid Instruments (PPIs) issued by the petitioner (Kalyan Jewellers India Ltd.):
a. Whether the issuance of such vouchers constitutes a "supply" of goods or services liable to GST.
b. If so, what is the correct "time of supply" for such vouchers under Section 12(4) of the CGST/TNGST Acts.
c. Whether these vouchers qualify as "actionable claims" and thus fall under Schedule III of the GST Acts, exempting them from being treated as supply of goods or services.

3. Key Facts
* Petitioner: Tvl.Kalyan Jewellers India Ltd., a company engaged in the manufacture and sale of ornaments, issues "Gift Vouchers/Gift Cards" (PPIs) as a sales promotion tool, sold through its retail outlets and third-party online portals.
* Petitioner's Accounting: The petitioner treated amounts received for vouchers as "Advance" or "Gift Voucher Liability," recognizing revenue/sales and GST only at the time of redemption.
* AAR Ruling (25.11.2019): Ruled that own closed PPIs are 'vouchers' and 'supply of goods'. Time of supply is date of issue if specific goods are identifiable, and date of redemption if for any goods. Applicable rates were specified based on physical or electronic nature.
* AAAR Ruling (30.03.2021): Modified the AAR ruling, concluding that a 'voucher' per se is neither a good nor a service but a means of payment. However, it held that the time of supply of the underlying goods/services is at the time of issuance of the voucher if the supply is clearly known (e.g., gold voucher for gold jewellery) under Section 12(4) of the GST Acts.
* AAAR Rectification (22.06.2021): Rectified a typographical error from "Gold Voucher" to "Gift Voucher" but stated this change had no bearing on tax liability, thus reiterating its previous stance.
* RBI Master Directions: The court noted that these PPIs are governed by RBI Master Directions on Issuance and Operation of Prepaid Payment Instruments (11.10.2017), which generally require refunds to customers if the voucher is not used after expiry. Some of the petitioner's Qwikcilver cards contained a non-refundable clause, which the court observed was contrary to RBI directions.

4. Arguments (Taxpayer vs Revenue)

• Taxpayer (Kalyan Jewellers):

  • Gift Vouchers/PPIs are "actionable claims" under Section 2(1) read with Section 3 of the Transfer of Property Act, 1882.
  • Being "actionable claims" (other than lottery, betting, gambling), they are neither supply of goods nor services as per Section 7(2)(a) read with Schedule III of the GST Acts.
  • Therefore, no GST is leviable at the time of issuance of these vouchers.
  • Alternatively, GST should only be levied at the time of actual redemption when the underlying goods/services are supplied.
  • Cited precedents like Sodexo SVC India Limited, Sunrise Associates, and Premier Sales Promotion Private Limited.

• Revenue (Union of India/GST Authorities):

  • PPIs/Vouchers are not "actionable claims" as defined in the Transfer of Property Act, 1882.
  • Tax is payable at the time of issuance of the Gift Vouchers under Section 12(4)(a) of the GST Acts, especially if the underlying goods are specified/identifiable.
  • The petitioner merely needs to adjust its billing method to account for tax at issuance.
  • Subsequent tax on redemption would only be on any differential amount to avoid double taxation.

5. Court’s Reasoning
* Vouchers as Actionable Claims: The Court analyzed the definitions of "voucher" [Section 2(118) GST], "actionable claim" [Section 2(1) GST read with Section 3 of Transfer of Property Act, 1882], and "goods" [Section 2(52) GST]. It concluded that a Gift Voucher/Card is a "document" and an "instrument" creating a right/liability. The amount specified in it constitutes a "debt" (referencing UOI Vs. Raman Iron Foundary). Since the RBI Master Directions mandate refund of unused balances post-expiry, the customer holds a claim to a debt enforceable in civil courts. Thus, Gift Vouchers/Cards qualify as "actionable claims."
* Exclusion from Supply: As "actionable claims" (excluding lottery, betting, gambling) are listed in Schedule III and specifically excluded from the definition of "supply" under Section 7(2)(a) of the GST Acts, the voucher itself is not a supply of goods or services. Therefore, no GST is payable on the issuance of the voucher per se. The taxability lies only in the underlying supply of goods or services when the voucher is redeemed.
* Time of Supply for Vouchers (Section 12(4) GST Act):
* The Court clarified the application of Section 12(4), distinguishing between two scenarios:
* Identifiable Supply (Section 12(4)(a)): If the Gift Voucher/Card is issued for a specific, identifiable item of jewellery of a specified value, then a "supply" (transfer of title under Schedule II, Clause 1(a) or 1(c) read with Section 7(1-A)) is deemed to occur at the time of issuance. In this case, tax is payable at the time of issuance.
* Unidentifiable Supply (Section 12(4)(b)): If the Gift Voucher/Card is issued for a general value, redeemable for any unspecified goods or services from the petitioner's range, the time of supply is postponed to the date of actual redemption. Tax becomes payable at that time.
* Previous Rulings: The Court found the AAAR's conclusion that a voucher per se is neither goods nor service partly correct (due to its actionable claim status), but deemed its ultimate conclusion of taxing all vouchers at issuance to be incorrect, as it failed to distinguish between identifiable and unidentifiable supplies as mandated by Section 12(4).
* Legislative Ambiguity: The Court also noted that the definition of 'Voucher' and Section 12(4) were not present in the 2016 Model GST Laws, suggesting they were later additions, contributing to interpretive confusion.

6. Statutory References
* Constitution of India: Article 226, Article 279A
* Central Goods and Services Tax Act, 2017 / Tamil Nadu Goods and Services Act, 2017:
* Section 2(1) ("actionable claim")
* Section 2(52) ("goods")
* Section 2(118) ("voucher")
* Section 7(1-A) (Scope of Supply)
* Section 7(2)(a) (Activities treated neither as supply)
* Section 12(4), 12(4)(a), 12(4)(b) (Time of supply of goods for vouchers)
* Section 98(6), Section 102
* Schedule II (Clause 1(a), 1(c))
* Schedule III (Sl.No.6 - Actionable claims)
* Transfer of Property Act, 1882: Section 3 ("actionable claim"), Section 130
* Payment and Settlement Act, 2007: Section 5
* Reserve Bank of India (RBI) Master Direction: RBI/DPSS/2017-18/58 Master Direction DPSS.CO.PD.No.1164/02.14.006/2017-18 dated 11.10.2017 (Paras 2.3, 2.4, 13.3, 13.7)
* Indian Stamp Act, 1899: Section 2(14) ("instrument")
* General Clauses Act, 1897: Section 3(18) ("document")
* Finance Act, 1994: Sections 65B(25), 66(44)
* Sale of Goods Act, 1930: Section 4
* Notifications: Notification No.1/2017-C.T.(Rate) dated 28.06.2017 (Sl.No.132, 382), G.O.(Ms)No.62 dated 29.06.2017.
* Educational Guide (20.06.2012) by CBIC: Sections 2.8.7 to 2.8.12.

7. Precedents Cited
* Sodexo SVC India Limited vs. State of Maharastra and Others, (2016) 53 GST 293
* Sunrise Associates vs. Government of NCT, Delhi and Others, (2006) 5 SCC 603
* Premier Sales Promotion Private Limited vs. Union of India and Others, W.P.No.5569 of 2022 / 2023(70) GSTL 345 (Karnataka High Court)
* UOI Vs. Raman Iron Foundary, (1974) 2 SCC 231 (for definition of 'debt', citing Webb v. Stenton and People vs. Arguello as approved in Kesoram Industries and Cotton Mills Ltd. v. Commissioner of Wealth Tax)