Chartered Accountant
Bookmark and Share
click here to subscribe our newsletter
 
 
Corporate News *  Service tax penalty can’t survive when assessee acted on dept.’s own view of non-taxability: Delhi High Court. *  GST section 74 extended limitation questionable when form 26AS mismatch was already known: Karnataka High Court grants interim relief. *  CGST demand prima facie impermissible after state GST settlement under section 128A: Bombay High Court. *  Supreme Court asks GSTAT to sympathetically consider delay as taxpayers pursued remedy before wrong forum. *  Supreme Court stays Tripura High Court ruling protecting genuine buyers from ITC denial over supplier’s GST default. *  Diary entries alone can’t prove clandestine removal of goods: CESTAT quashes excise penalty on steel trader. *  Customs could investigate preferential tariff claims even before sec. 28DA: Delhi High Court. *  Customs dept. relied on fake AI generated case laws: supreme court quashes Rs. 425.28 crore penalty. *  No GST exemption in affiliation and annual registration charges for admission or conduct Of examinations: GSTAT. *  Mere invoices, cheque payments insufficient to establish genuine movement of goods: GSTAT restores Rs. 43.44 lakh ITC demand. *  Consolidated GST show cause notice covering multiple financial years is not without jurisdiction: Delhi High Court. *  Construction of independent houses on separate plots not taxable as ‘Residential Complex’ without common facilities: CESTAT. *  GST penalty exceeding statutory maximum unsustainable; Allahabad High Court quashes ? 50,000/- penalty after taxpayer filed return and paid late fee. *  GST order against standard chartered bank passed without hearing set aside by Bombay High Court. *  Retracted statements can’t be relied upon without cross-examination: CESTAT quashes gold confiscation. *  Burden to prove misclassification lies on customs department: CESTAT. *  CESTAT quashes Rs. 98 lakh excise demand on clearance of used refractory brick scrap. *  Service tax demand on irrigation works quashed: Karnataka High Court rules sale of goods component not taxable as service. *  GSTAT restores tax and penalty for transporting iron scrap without E-way bill citing intent to evade tax. *  Madras High Court stays GST recovery from directors without opportunity to show cause under section 89. *  Madras high court stays GST recovery notice against directors; finds prima facie case on applicability of section 79(1)(c). *  Procedural lapses can’t justify harsh punishment without serious customs breach: CESTAT quashes customs broker licence revocation. *  Service tax payable on land leasing and sports complex charges: CESTAT. *  Settled customs dispute can’t be reopened through Article 226 challenge to interest liability: Delhi High Court. *  Mere facilitation of customs clearance can’t establish knowledge of smuggling: Madras High Court. *  GST registration cancellation stayed: Allahabad High Court questions 99% ITC utilisation cap under rule 86B. *  Composition scheme lapses automatically on crossing Rs. 1.5 crore turnover: GSTAT. *  Gujarat High Court quashes GST cancellation orders after officer relied on non-existent AI-generated case laws. *  Importers liable for customs duty benefits availed through manipulated scrips: Delhi High Court. *  Procedural E-way bill lapse alone can’t justify penalty where genuine transaction and absence of tax evasion are established: GSTAT.
Subject News *  Documentary evidence dominates probe, further custody unwarranted: mumbai court grants bail in Rs. 22.44 crore customs duty evasion case. *  Business premises can’t remain sealed for non-participation in GST search: Allahabad High Court. *  GST pre-deposit must be refunded proportionately when taxpayer partly succeeds in appeal: Bombay High Court. *  Supreme Court grants 30 days to file GST appeal; keeps pre-deposit issue open due to deposit in parallel CGST proceedings. *  GST demand can’t exceed amount proposed in SCN: Allahabad High Court quashes Rs. 20.47 Crore order. *  Hundreds-of-crores GST demand and heavy 10% pre-deposit no ground to bypass statutory appeal: Punjab & Haryana High Court. *  Delhi High Court refuses to entertain challenge to gold confiscation due to statutory appeal remedy and unexplained delay. *  Procedural error in customs broker licence inquiry can be rectified through remand: Delhi High Court. *  GSTR-2A mismatch alone can’t justify ITC denial without invoice-wise verification; personal hearing mandatory: GSTAT. *  GST order passed without uploading personal hearing notices violates sec. 75(4): Allahabad High Court. *  TAX EVASION - Sec. 74 GST SCN quashed for not spelling out fraud, wilful misstatement or suppression: Allahabad High Court. *  STPI’s SOFTEX certification and NoC charges taxable as business support services: CESTAT. *  Suspicion can’t replace proof: CESTAT quashes penalty in alleged gold-smuggling operation. *   Limitation runs from communication of order: Madras High Court upholds rejection of delayed GST Appeals. *  Rajasthan High Court quashes GST demand over unsigned show cause notice. *  ITC recovery upheld where supplier failed to deposit GST: Rajasthan High Court. *  Customs commissioner’s empowered to make port trust liable for duty on pilfered goods: Supreme Court. *  Rectification proceedings can’t be used to challenge an uncontested GST assessment through a writ petition: Andhra Pradesh HC. *  GST proceedings against deceased proprietor unsustainable without notice to legal heir: GSTAT. *  Mere availment of ineligible self-assessed ITC doesn’t amount to suppression without evidence of fraud or wilful misstatement: GSTAT. *  Disposal of mining overburden by entity authorised by mining lease holder constitutes taxable service: CESTAT. *  Toll plaza data not mandatory for ITC refund: GSTAT. *  Disputed GST fraud allegations require investigation: Punjab and Haryana High Court makes interim bail absolute in alleged fraud and GST fraud case. *  Non-manufacturer contractor liable to deposit excess excise duty collected from buyer: CESTAT. *  GST order can’t reject taxpayer’s reply as “not satisfactory” without reasons: Madhya Pradesh High Court. *  Uncorroborated statements can’t establish alleged diversion of duty-free goods: CESTAT. *  Erection services were not liable to service tax prior to 10th september 2004: CESTAT. *  Sec. 74 GST notice must spell out statutory ingredients for invoking extended tax demand proceedings: Allahabad High Court. *  No jurisdictional bar under section 6(2)(b) in parallel CGST SGST proceedings: Delhi High Court refuses to bypass GST appeal remedy. *  Madras High Court remits GST demand for fresh adjudication after taxpayer claims it was unaware of SCN following business closure.  

Comments

Print   |    |  Comment

GST Update No 293 on availability of ITC on vouchers of loyalty points

GST Update No 293 on availability of ITC on vouchers of loyalty points
The dispute as regards to admissibility of input tax credit on vouchers and subscription packages procured by the applicant from third party vendors for providing loyalty and reward points has been a matter of discussion since erstwhile indirect tax regime. The tug of war between the department and the taxpayers has now become a never-ending task wherein the departmental authorities are not willing to provide input tax credit on the same while taxpayers argue that it is admissible being a promotional expenditure incurred during the course of business. Recently, one more case was reported on parallel lines before Karnataka AAR in the case of M/S MYNTRA DESIGNS PRIVATE LIMITED. The analysis of this decision is the subject matter of discussion of our present update.
The applicant is a major fashion e-commerce company and owns e-commerce portal, engaged in the business of selling of fashion and lifestyle products. The suppliers intend to sell such products by listing them on portal and thereafter sell the product. Once the order is placed, the applicant collects money and settles the amount payable with the supplier. The applicant in order to increase the customer base and footfalls, proposes to run a loyalty program by issuing points to the customer on the basis of purchases effected to them. The participation in the said scheme shall be based on pre-defined eligibility criteria laid down by the applicant and the customer will be bound to accept the same. The advance ruling was therefore sought by the applicant as to whether the applicant would be eligible to avail input tax credit as per Section 16 on the vouchers and subscription packages procured by applicant from third party vendors that are made available to the eligible customers participating in loyalty programs.
The applicant procures the vouchers and subscription packages from third party vendors upon payment of GST and provide them to the customers. The applicant themselves is not engaged in business of supply of said vouchers andthe packages. The vendors will be raising invoices by classifying their outward supply as “other professional, technical and business services”. The expenditure incurred by the applicant in this respect is not capital expenditure and therefore, allowed under section 37(1) of Income Tax Act under “Profits and gains of business or profession”.The applicant referred to the definition of voucher and submitted that the time of supply would be date of issuance of voucher and hence, GST shall be levied accordingly. The applicant placed reliance on provisions of Section 16 of the Act and submitted that they are eligible to avail input tax credit on the same since, all the conditions of Section 16 are fulfilled. Further, it was submitted that procurement of voucher is “in the course of furtherance of business”. Further, the input tax credit on the same is not restricted or blocked as per Section 17 of the Act. It was further contended that vouchers shall be made available to the customers who wish to redeem the loyalty points and no monetary consideration will bereceived in place from the customer. Further, the loyalty points are not transferrable and cannot be converted into cash and used in place of cash. It was also argued that loyalty program ispurely commercial driven. Further, the input tax credit on the same is not blocked under Section 17(5)(h) of the Act, since the third party classifies the same as service and not goods and cannot be termed as “gift” also.The AAR referred to various provisions of CGST Act, 2017. It was stated that the subscription package would also qualify for the definition of voucher. Moving further, it was analysed as to whether the voucher would come under ambit of goods or services. Therefore, it was held that the said vouchers shall fall under “goods” since the definition is not restricted to “tangible” properties only. Instead, it refers to movable property which is capable of being transmitted and voucher is one of them. Further, reference was also drawn to the decision of Apex Court in the case of TATA CONSULTANCY SERVICES V/S STATE OF ANDHRA PRADESH and VIKAS SALES CORPORATION V/S CCE. Further, reference was made to Schedule II ofCGST Act, 2017 stating that the supply of voucher is supply of goods. Moreover, it was analysed that loyalty program is on basis of particular transaction which are having no monetary value and are non-transferrable. This implies that the customers shall receive the vouchers free of cost and hence, it is coveredunder the ambit of “gift” and covered under Section 17(5)(h) of the CGST Act, 2017. Therefore, it was concluded that the input tax credit on the same shall not be available.The above decision is a setback for the industry since the business houses often introduce schemes like these to increase the customer base and profit margins. Although, there had been similar decision on earlier occasion on the same line by Tamil Nadu AAAR in the case of GRB DAIRY FOODS PVT. LTD. wherein it was held that no input tax credit can be claimed on gifts and rewards given without consideration. However, the issue needs to be re-visited as the term “gift” in normal parlance means anything given without any condition or expectation in return. However, in the present case, the vouchers are conditional as they are given on customer purchasing specified quantity of goods which intent to increase the sales base. Consequently, the said vouchers should not be treated as “gift” so as to deny the input tax credit of GST paid on procurement of such vouchers. A suitable clarification in this regard from the government iseagerly awaited.
Department News


Query

 
PRADEEP JAIN, F.C.A.

Head Office : -

Address :
"SUGYAN", H - 29, SHASTRI NAGAR, JODHPUR (RAJ.) - 342003

Phone No. :
0291 - 2439496, 0291 - 3258496

Mobile No. :
09314722236

Fax No. :0291 - 2439496


Branch Office : -

Address:
1008, 10th FLOOR, SUKH SAGAR COMPLEX,
NEAR FORTUNE LANDMARK HOTEL, USMANPURA,
ASHRAM ROAD, AHMEDABAD-380013

Phone No. :
079-32999496, 27560043

Mobile No. :
093777659496, 09377649496

E-mail :pradeep@capradeepjain.com