The Karnataka Appellate Authority for Advance Ruling ( AAAR ) has held that Myntra design Pvt Ltd which is an Indian fashion e-commerce company would not be eligible for Income Tax Credit ( ITC ) on vouchers as it was neither good nor service.
The Appellant Myntra design ns Pvt ltd owns an e-commerce portal www.myntra.com and is a major Indian fashion e-commerce company. In order to enhance its business, the Appellant proposed to run a loyalty programme where loyalty points would be awarded on the basis of purchases made by the customer on its e-commerce platform.
Participation in the said program would be based on meeting the pre-defined eligibility criteria. The Appellant through its portal would make the vouchers and subscription packages available to those customers who wished to redeem the loyalty points earned.
The Appellant has sought Advance Ruling as to whether the Applicant would be eligible to avail of the input tax credit, in terms of Section 16 of the CGST Act, 2017 on the said vouchers and subscription packages from third-party vendors that are made available to the eligible customers participating in the loyalty program against the loyalty points earned by the said customers.
Tarun Gulati on behalf of the appellant submitted that the appellant had fulfilled all the conditions for availing input tax credit as laid down in Section 16 of the CGST Act and also were not restricted by any of the provisions of Section 17. He stated that the vouchers given to the customers were not a gift in as much as there was a contractual obligation between the Appellant and the customer, that once the customer had earned the loyalty points the Appellant was obligated to give the voucher.
The Appellate Authority for Advance Ruling ( AAAR ) of Ranjana Jha and Shikha C, observed that the vouchers intended to be procured by the appellant were neither good nor service and could not be taxed referring to the honourable Karnataka High Court decision in “Premier sales promotion Pvt Ltd case”.
The Authority upheld the ruling of lower authority observing that,
“The Appellant has also made detailed submissions on why the vouchers cannot be termed as ‘gifts’ given to the customers. Again, we find that examining this aspect is of no relevance since we have already held that input tax credit is not eligible for an inward supply which is held by the High Court as being neither a supply of goods nor service. Therefore, while we agree with the ultimate ruling given by the lower Authority that input tax credit is not available on the vouchers received by the Appellant.”
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