Whether the e-vouchers given to customers without any monetary consideration said to be an input service or input goods and whether input tax credit on same is available to person giving them for free?
Section 17(5) of the CGST Act, 2017 clearly restricts a person from availing the input tax credit on goods
given as “gifts”.
A similar question came before the authority of advance ruling of Karnataka. Applicant was managing
e-commerce platform where it was proposing to provide the loyalty points (in the form of vouchers and
subscriptions) to the eligible customers. Everything it was proposing to do was to increase the foot fall on
their platform. The vouchers shall be given to eligible customers, with certain terms and conditions, will be non-transferable, can be redeemed etc. The said expense of purchasing vouchers will be charged to
profit and loss and it is also allowed under section 37(1) of the Income Tax Act. Considering all these facts
and the fact that e-vouchers and subscriptions are “Service”, therefore, input tax credit on same should
be allowed, applicant submitted. Nothing contains in section 17(5) of the CGST Act, which restricts from
claiming the GST credit on such transactions, applicant submitted.
The Advance ruling authority considered e-vouchers as goods by relying on judgments of Tata
Consultancy Services Vs State of AP (2004) and Vikas Sales Corporation Vs. CCE (1996) SC, being evouchers can be transmitted, delivered, consumed, stored, possessed etc. Furthermore, that these goods will be given free of cost to its holder therefore, the input tax credit shall not be admissible as these are the “gifts”.
In our view, the test of classifying an item as “goods” or “services” is important for deciding the admissibility on input tax credit on an expense. In case the classification turns out to be “services”, one can take a stand of claiming the input tax credit if it is adding any value to the furtherance of the business for example, expenses on marketing, advertisements etc.
Source: M/S. MYNTRA DESIGNS PRIVATE LIMITED, Advance Ruling, KAR ADRG 33/2022 Karnataka
