Electronic Gift Vouchers Can Be Valid Mode Of Passing GST Rate-Cut Benefit If Unconditional: GSTAT Delhi

The GST Appellate Tribunal at Delhi has recently held that electronic gift vouchers (EGVs) can be a mode of passing on a GST rate reduction, where they provide customers a direct monetary credit without conditions, expiry or usage restrictions.

The ruling came in proceedings involving Sane Retails Pvt. Ltd., accused of failing to pass on a reduction in GST from 28% to 18% on MI LED Television 4A 80 cm from January 1, 2019. The tribunal found that the company had substantially complied with the anti-profiteering requirement, but had failed to account for ₹10,241.

Technical Member Anil Kumar Gupta of the GSTAT Principal Bench dealt with the matter. He held that Section 171 of the CGST Act requires the benefit arising from a reduction in the tax rate to be passed on to customers.

“This Tribunal also notes that the objective of the anti-profiteering provisions under Section 171 of the CGST Act, 2017 is to ensure that the benefit of GST rate reduction is passed on to the consumers/customers and that the supplier of goods and services should not make profit from the reduction of the tax rate under GST. The provision does not prescribe any particular mode or manner in which the benefit is required to be passed on. What is essential is that the benefit reaches the ultimate recipient and the supplier does not retain the same.”, it ruled.

The Directorate General of Anti-Profiteering (DGAP) had calculated the profiteered amount at ₹7,79,947. Credit notes worth ₹2,21,056 issued to 174 customers for cancelled or returned transactions were accepted, reducing the amount to ₹5,58,891.

Sane Retails produced records showing EGVs worth ₹5,48,650 issued against 488 customer orders.

The DGAP opposed treating EGVs as a valid method. It relied on the Delhi High court's observations in Reckitt Benckiser India Pvt. Ltd. v. Union of India, arguing that the benefit should reach consumers through commensurate reduction in prices or direct monetary reimbursement.

The tribunal accepted the explanation. It found that the EGV balance was credited to customers' wallets without an expiry date and could be used without restrictions. The credits were traceable to individual transactions.

“The EGV balance represents a monetary value standing to the credit of the customer, and therefore, the issuance of EGVs constitutes a monetary transfer of the benefit amount by the Company to the customer.", the tribunal noted, holding that issuance of the vouchers constituted a monetary transfer of the benefit.

The tribunal also rejected the objection to the description “Offers and cashback” appearing against the credits. It found that this was a system-generated description and did not alter the transaction.

The tribunal distinguished Reckitt Benckiser, observing that the earlier case involved festival discounts, cross-subsidisation or additional quantities, whereas the EGVs represented a direct monetary credit.

A difference of ₹10,241 remained between the revised profiteering amount and the EGVs issued. Sane Retails could not trace the balance to a particular customer or invoice and offered to deposit it in the Central Consumer Welfare Fund.

The tribunal accepted the offer and directed the company to deposit ₹10,241 within 30 days, with 18% interest from the date of collection of the higher amount until deposit.