Bus pass is not an actionable claim and liable to GST: AAAR [Read Order]

The Karnataka Appellate Authority of Advance Ruling (AAAR) ruled that bus pass is not an actionable claim and liable to Goods and Service Tax (GST).

The Appellant, Ascendas Services (India) Pvt. Ltd. is engaged in the business of operation and maintenance of International Tech Park, Bangalore which includes operation and maintenance of electrical systems at common areas, building, and civil repairs, maintenance of lifts, etc. In addition, the appellant also arranges for the transport of its staff and employees of the corporate clients in the Tech Park who are the tenants of the business park.

The Appellant charges a separate fee of Rs 300 per commuter as a ‘facilitation fee’ for arranging the transport facility for the said commuters. In this connection, the Appellant sought an advance ruling in respect of the question that whether the value of bus passes distributed by the applicant to the commuters is to be included in the value of facilitation charges as per section 15(2) of the CGST Act, 2017 and KGST Act, 2017 and whether the supply of service in the hands of the applicant could be classified as merely a supply of facilitation services between BMTC and the commuters.

The Karnataka Authority for Advance Ruling held that the value of the bus passes distributed by the applicant to the commuters and the facilitation charges is to be included in the value of services provided by the applicant. The supply of service in the hands of the applicant could not be classified merely as a supply of facilitation service between BMTC and the commuters.

Term ‘actionable claim’ has got two limbs. One is that it is a claim to any unsecured debt. The second limb is about claims to beneficial interest in movable properties not in actual or constructive possession of the claimant which shall be recognized as an affordable ground for relief by a civil court.

These two categories of claims can be existent, future, contingent or conditional. However, every claim is not an actionable claim. It must be a claim either to a debt or to a beneficial interest in movable property. The beneficial interest is not the movable property itself, and may be existent, accruing, conditional or contingent. The movable property in which such beneficial interest is claimed, must not be in the possession of the claimant. An actionable claim is therefore an intangible right.

The Appellant has likened the bus passes to recharge vouchers and have relied on the West Bengal Tax Tribunal decision in the case of Bharti Airtel Ltd vs AGST [2010 (34) VST 202] wherein it is held that recharge vouchers are an acknowledgment of receipt of money in advance for rendering telecom services in future and as the money has been received in advance, it constitutes a debt to the service provider. At the outset, we state that the case of Bharti Airtel Ltd was rendered by the West Bengal Tax Tribunal in the context of Sale of Goods Act wherein the definition of ‘goods’ under the said Act excluded actionable claims.

“The commuter produces the bus pass for purchasing the service of transportation. The bus pass only gives the commuter the right to travel. If the commuter does not use the bus pass within the duration for which it is valid or loses the bus pass, it becomes invalid and cannot be used to procure the service of transportation. The bus pass is only a contract of carriage. A contract is not property, but only a promise supported by consideration. Thus, the bus pass is not an actionable claim as defined under the Transfer of Property Act. It is only an instrument accepted as consideration/part consideration while purchasing the service from the Appellant. Therefore, we do not agree with the claim of the Appellant that the bus pass is an actionable claim not liable to GST,” the AAAR, while upholding the AAR’s order observed.