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The Applicant had sought an advance ruling before the Karnataka AAR to ascertain whether ITC would be available on vouchers and subscription packages procured from third party vendors that are made available to the eligible customers, participating in the loyalty program against the loyalty points earned by such customers.
The Applicant contended that the procurement of the vouchers and the subscription packages on payment of the GST from third party vendors are exclusively for the purpose of business as an e-commerce platform leading to increase in earning commission. The Applicant had further submitted that the vouchers and subscription packages are classified as a services and not goods.
The AAR while referring the definition of voucher u/s. 2(118) of the CGST Act, observed that the subscription packages procured is also voucher as it plays an obligation on the potential supplier to accept it as consideration for supply of goods or services to the customer. It was further observed that that the vouchers are a movable property capable of being transmitted electronically or supplied physically, and thus qualify as goods.
The AAR further observed that the participation of a customer in the loyalty program will be dependent on meeting the pre-defined eligibility criteria plus by agreeing to the terms and conditions associated with the program. It was also observed that the Applicant recovers the full amount from the customer and gives the loyalty points free of cost, and the said loyalty points do not have any monetary value and are non-transferable and cannot be converted to cash. Hence, it implies that the vouchers are issued free of cost to the customers. In view of the above, the AAR held that the Applicant is not eligible to avail the ITC on the vouchers in terms of section 17(5)(h) of the CGST Act.
Myntra Designs Private Limited [KAR ADRG 33/2022 dated 14 September 2022]
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