In Re : M/s Loyalty Solutions and Research Private Limited
GST
2018 (7) TMI 1421 – AUTHORITY FOR ADVANCE RULING – HARYANA – 2018 (15) G. S. T. L. 123 (A. A. R. – GST)
AUTHORITY FOR ADVANCE RULING – HARYANA – AAR
Dated:- 11-4-2018
ADVANCE RULING NO. HAR/HAAR/R/2017/18/4
GST
Sangeeta Karmakar (Member CGST) and Vijay Kumar Singh (Member)
Present for the applicant : Sh Sandeep Chilana & Sh Atulya Kishore, Advocate (POA)
Ruling
The applicant namely M/s Loyalty Solutions and Research Pvt. Ltd. (LSRPL). owns and operates a reward point based loyalty programme that is integrated towards it partners and their customers. Under this programme, LSRPL is providing certain services to its clients/partner, such as M/s Nice Chemicals Pvt. Ltd. (NICE). The applicant is managing the customer loyalty programme for its clients/partners such as NICE, which is based on issuance of reward points, also known as payback points by the applicant to end customers. These reward/payment poi
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
tomers, while making future purchases of products of ''partners”.
c) in pursuance to these reward points management, “partner” transfers amount equivalent to 0.25 of INR, per reward point, as issuance charges to LSRPL
d) Whenever any purchase is made by end customer, by using/redeeming rewards points, LSRPL transfers amount equivalent to 0.25 INR per reward point used to the concerned store and the concerned store gives discounts the payment to be received from end customer to this extent.
e) The rewards points have a validity period of 36 months, meaning thereby that the customer cannot redeem these reward points, after expiry of 36 months from the date of issuance.
f) It may happen that the customer does not or is not able to redeem the rewards points, within their validity period of 36 months from the date of issue.
g) in such cases, as per the agreement, the rewards points are forfeited by LSRPL and the amount equivalent to 0 25 INR per reward point is being retained b
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
of the end customers to redeem the payback points within their validity period can be treated as “supply” of any other goods or services and consequently be chargeable to GST under the CGST, HGST or IGST Act?
Comments of the concerned officer U/S 98(1) OF THE CGST/HGST ACT, 2017
5. The Deputy Excise & Taxation Commissioner (ST), Gurgaon (East), vide letter No.3086 dt.22.03.18, submitted the requisite comments on both the above questions raised by the applicant, as under:
(a) The applicant recovers the underlying value of 0.25 INR per reward point to the Customers of the partners enrolled under the loyalty programme and on issuance of such points the applicant charges issuance fees . However , the applicant nowhere submits that the amount received by the applicant in return of issuing points are returned back to the partners when such points are not used within validity period. Therefore, it is not an actionable claim as the applicant fails to meet all the characteristics as stated
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
rs Therefore, the above stated transaction will attract GST.
Record of Personal Hearing
6. Personal hearing in the case was conducted on 11.04.2018 which was attended by Sh. Sandeep Chilana & Sh. Atulya Kishore, Advocates (POA). They had reiterated the submissions made in their application. After detailed discussions the application was admitted being covered by clause (e) & (g) of section 97 (2) of the CGST/HGST Act 2017
On the merit of the case they were heard in detail. Their main contention is that the redemption points issued to their clients for further distribution to the participant/end customers is in the nature of actionable claim and as per exclusion entry 6 of schedule-III of the CGST/HGST Act, these are not leviable to GST. Any amount of forfeited redemption points thus, also does not attract any GST. After hearing them in detail the judgment was reserved which Is being released today
DISCUSSIONS AND FINDINGS OF THE AUTHORITY
7. As per Section 2(i) of the CGST/HGST Ac
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
s or transactions which shall be treated neither as supply of goods nor as supply of services. Point 6 in schedule III includes actionable claims other than lottery, betting and gambling. Therefore, such actionable claims which are not lottery, betting, gambling, though are goods under Section 2(52) of the CGST Act, but are excluded from levy of GST in terms of Schedule III to CGST Act.
9. Rewards points earned by the end customers for purchase of products of “partners” to loyalty programme are indeed “actionable claim”. However, the question arises that, when these reward/payback points are not redeemed by the customer for the reasons that their validity period has expired, do such reward points continue to be actionable claim?
10. In this regard, it is observed that after the expiry of validity date, these reward/payback point can no longer be redeemed/encashed by the end customer and the end customer loses any right over them. Also, as per the definition of “actionable claim”, giv
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
o the activities of their providing services to the said “partners” through the loyalty programmes run by LSRPL
12. Even from the clauses of agreement between LSRPL and the “partners”, it is evident money equivalent of reward points expired/ not redeemed by customers/forfeited after expiry, would be retained by LSRPL. Thus, the agreement itself provides for revenue to LSRPL, in shape of retaining the issuance fee. In the event of the forfeiture, the Issuance fee received by the applicant from the partner in relation to such lapsed payment points, is retained by the LSRPL. Thus, the agreement between LSRPL and the partner specifically provides that it is actually the issuance fee that is being retained by LSRPL in the event of non-redemption of loyalty points by customers
Thus, this amount is liable to be considered as consideration for supply of services by LSRPL to its partners in the normal course of business and becomes part of remuneration for LSRPL for providing services.
13. L
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =