The Karnataka Appellate Authority of Advance Ruling, AAAR in the case observed and has held that input tax credit (ITC) is not available on the vouchers and subscription packages being procured by Myntra from third-party vendors.
The two-bench member comprising of Ranjana Jha and Shikha C. in the case observed and has relied on the decision of the Karnataka High Court in the case of M/s Premier Sales Promotion Pvt Ltd versus Union of India & Ors, wherein it has been held by the court that vouchers do not fall under the category of goods and services, and therefore, the issue and supply of vouchers would not attract GST.
Therefore, the appellant, Myntra, owns an e-commerce portal, www.myntra.com, being a major Indian fashion e-commerce company. Therefore, in the case the appellant being in the business of selling fashion and lifestyle products through the said e-commerce portal an din order to enhance the business of them, the said appellant proposed to run a loyalty program where loyalty points will be awarded on the basis of purchases made by customers on its e-commerce platform. The participation in the program will be based on meeting the pre-defined eligibility criteria and subject to the acceptance of customer of the terms and conditions. Through the said portal, the appellant would make the vouchers and subscription packages available to those customers who wished to redeem the loyalty points earned.
In the present case, the appellant seek an advance ruling on the issue of whether input tax credit can be accessed on the vouchers and that the subscription packages which are being procured by the applicant from third-party vendors and are being made available to the customers eligible for participating in the loyalty program.
It has been held by the AR that the applicant is not eligible to avail the input tax credits on the vouchers and subscription packages procured by the applicant from third-party vendors that are made available to the eligible customers who are practicing loyalty program against the loyalty points earned or accumulated by the said customers.
The appellant in the case challenged the ruling of the AAR. The appellant contended that the vouchers are not being provided to the customers for ‘free of charge.” The court while considering stated that it would be accounted for in the commission which is being charged from the sellers, on which applicable GST would be discharged.
It has also been held by the AAAR observed and has held that the primary condition for eligibility to input tax credit is that there should be an inward supply of either goods or services or both on which tax imposed a charged by the supplier. Therefore, it has been held that the vouchers are held to be neither goods nor services and cannot be taxed under the GST and it has been intended to be procured by the appellant are neither goods nor services, the question of eligibility does not arise for input tax credit.