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Tax Vista Your weekly tax recap Edn. 187 - 15th Jan. 2024 By Dr. G. Gokul Kishore |
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Gift vouchers are actionable claims not exigible to GST - Underlying supplies attract tax
The taxability of transactions based on gift vouchers and issue of vouchers themselves is as mindboggling and elusive as the goods dealt by the petitioner - gold. Earlier the Appellate Authority for Advance Ruling (AAAR) had held that vouchers represent future consideration and the underlying transaction of sale is taxable at the point of issue of vouchers itself. The Madras High Court, after analysing the definition of debt, instrument, voucher, actionable claim and the RBI Master Direction dated 11.10.2017 relating to issuers of PPIs (Prepaid Payment Instruments) held that such vouchers qualify as actionable claims in as much as the rights are enforceable in case of non-redemption/non-refund of the amount paid by the customer. Though as per terms and conditions, one of the vouchers stated that if the voucher is not redeemed within the agreed period, the amount would not be refunded, it was held that such clause violates the RBI directions. A voucher being an instrument which provides a right/creates a liability for the issuer is an actionable claim and hence covered by Schedule III to CGST Act and is neither goods nor service. This is for taxability of voucher "per se". The underlying supply would be taxable and time of supply would be as per the provisions - if supply of the goods and value are identifiable at the time of issuance of gift vouchers / card, it would be taxable at that time, else, at the time of redemption against specific goods.
While the order may be perceived as reiterating the obvious, the clarity in approaching this issue is welcome and should guide both the department and the taxpayers. Various issues relating to vouchers and underlying supplies and different categories of persons involved in issue and operation of the same need to be clarified comprehensively based on the recommendations of the GST Council. While litigation on such issues cannot be ruled out even after clarification, at least it will aid the courts in interpreting the provisions after getting to know the intention or thought process of the policy makers [2024-VIL-28-MAD].
Limitation of each year different - Show Cause Notice cannot be bunched for a period
Perhaps being a new law, GST had the benefit of detailed analysis of every provision, including settled principles like every assessment being independent and different. The petitioner assailed the action of the department which had issued bunching of show cause notices dated 28.09.2023 for five assessment years starting from 2017-18 to 2021-22. It relied on State of Jammu and Kashmir and Others v. Caltex (India) Ltd, 1965-VIL-09-SC, Kesar Enterprises Ltd., v. State of U.P and Others, 2011-VIL-56-SC, to contend that determination of tax due under Section 73 is with reference to a financial year and the limitation to complete the proceedings and issue an order is three years from the due date to file annual return for that particular financial year. Also, if bunching of SCN was allowed, it would permit the department to overcome the limitation indirectly. The High Court held that the limitation period of three years would be separately applicable for every assessment year and it would vary from one assessment year to another and cannot be carried over. Therefore, limitation is not continuing in nature and the same cannot be clubbed. The High Court allowed the prayer of the petitioner to split the notices though it opined that the SCN was liable to be quashed in view of the fault in bunching of notices. There was a flood of orders for 2017-18 passed on 30-12-2023 despite being a Saturday as the normal period of limitation (after extensions) got over on the last day of 2023. Considering the haste, litigation on this issue is bound to crop up [2024-VIL-19-MAD].
Exercise of discretionary power to be made without delay
Even if statute confers discretion on an authority and the same is sought to be invoked, the authority should convey whether he would exercise it or not and he cannot delay or simply sit over such request. This can be culled out as the ratio of a recent order of Calcutta High Court. The petitioner - a real estate company opted to pay GST at new rates from 1-4-2019. ITC reversal was calculated in respect of ongoing project and the petitioner applied for such reversal in 24 instalments with interest. However, no decision was taken on such request and later interest of around Rs. 22 lakhs was demanded. The petitioner sought rectification and the amount was reduced in the rectified order but appeal against such order was rejected on limitation.
The petitioner filed writ petition with the primary argument that the Commissioner was bound to convey his decision on permitting them to reverse ITC in instalments. But the High Court noted that "may" has been used in the relevant provision and therefore, it was discretionary for the Commissioner to consider the request for reversal in instalments. It further said that even if the Commissioner allows the request, it is open to him to decide on the number of instalments. Observations of lower authority on petitioner being eligible for instalment facility was considered as tentative and no final decision was ever taken by the Commissioner. The Court accepted the contention that delay in decision contributed to escalation of interest and the appellate authority was directed to consider the matter afresh on merits. Generally, writ courts are perceived to be strict in exercising jurisdiction but when it comes to natural justice, delay, fairplay, etc., they tend to step in [2024-VIL-32-CAL].
Interest on delayed refund payable from date of receipt of complete application
Every time, the efforts to obtain refund from GST authorities are to be doubled when interest is also sought for delay. Statutory provisions are salutary - if refund is delayed beyond sixty days, interest is required to be paid. But, in this country, those who implement law, do it selectively. Refund was granted to the petitioner but interest was not granted and the appellate authority did not even bother deal with this issue. The High Court noted that out of four refund claims, three were deficient and therefore, the period for which interest will be payable will run from the date of submission of complete application after removal of deficiencies. In respect of one claim, there was no defect in the application and therefore, interest will have to be paid after expiry of sixty days from the date of filing the application. The Court directed the authorities to pay interest after computing the same taking these facts into account. Section 56 of CGST Act providing for interest on delayed refund and containing the words "the date of receipt of the application" has been interpreted by the Court as "date of receipt of complete application". While this order may be helpful to the GST department in certain cases to rely on deficiencies, taxpayers claiming refund should be alert in ensuring that the application is acknowledged as complete one which is easier said than done [2024-VIL-18-RAJ].
Refund of ITC - Exclusion of period applicable to claims disposed before extension of time
Refund of unutilised input tax credit was rejected apparently because of delay. The appellate authority had passed the order in February, 2022 while the notification extending the time-limit for refund claims by excluding the period from 1-3-2020 to 28-2-2022 was issued on 5-7-2022. The petitioner opted to knock the doors of writ court and the High Court held that FIRC date is relevant and considering the exclusion of period due to Covid, the refund claim was within the two year time period. The order was quashed with the direction to the authority to sanction refund. Such extension came after the orders were passed by the authorities and therefore, the department could not be faulted with. Since the GST Tribunal is not in place after six plus years of introduction of GST, time of writ courts is spent on such matters [2024-VIL-31-MAD].
(The author is an Advocate, Gokul & Subha Advocates, Chennai. The views expressed are personal. The author has published books on cross-border taxation and investigations & appeals under GST. He edits R.K. Jain's GST Law Manual. E-mail - gokulkishore@gmail.com)