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AAAR: Myntra ineligible to ITC on vouchers procured from third-party vendors

& supplied to eligible customers

Mar 03, 2023

In the matter of Myntra Designs Pvt. Ltd. [TS-68-AAAR(KAR)-2023-GST]

Conclusion
Karnataka AAAR holds Myntra (Appellant) ineligibile to ITC on vouchers and subscription packages
procured from third-party vendors that are made available to eligible customers participating in loyalty
program, modifies AAR ruling; Appellant owns an e-commerce portal and is a major Indian fashion e-
commerce company; In order to enhance their business, appellant proposes to run a loyalty programme
where loyalty points will be awarded on the basis of purchases made by the customer on its e-commerce
platform; Senior Advocate appearing for Appellant advancing that Appellant fulfils all the conditions for
availing ITC as per section 16, unaffected by section 17, explains that its client is an online fashion
platform and it has a scheme for its customers, where based on their footfall and their purchases,
customer is eligible to redeem points for vouchers (Myntra does not issue vouchers but purchases them
from elsewhere) and subscription packages; Appellant submits that in present case since the inward
supply in question is received as a service and not goods, which is infact a business expenditure for
furtherance of business and hence eligible for credit; Among other submissions, Appellant submits that
vouchers given to the customers are not a gift in as much as there is a contractual obligation between
the appellant and customer that once the customer has earned the loyalty points appellant is obliged to
give the voucher; AAAR outlining the primary conditions for eligibility of ITC as contained u/s 16, peruses
draft agreement with their vendors presented by Appellant wherein the vendor states that they are in the
business of issuing electronic vouchers as ‘services’; Following the ruling passed by Karnataka HC
in Premier Sales Promotions Pvt Ltd holding that ‘vouchers’ are neither goods nor
services, AAAR observes that it “is to be respected as the law applicable as on date until the decision is
stayed or reversed by a higher court on an appeal by the Department”; AAAR rules that when the
vouchers intended to be procured by the Appellant is neither goods nor service, the question
of ITC eligibility does not arise as “primary condition for eligibility to input tax credit is that there should
be an inward supply of either goods or services on which tax is charged by the supplier”; On appeal
procedures, noticing that assessee challenged AAAR order before HC in writ proceedings….in the same
manner as an appeal proceeding, studies the appeal mechanism under GST and clarifies that “in the
current scenario, because the GST Tribunal is yet to be constituted, the High Courts have been
entertaining writ petitions under Article 226…In the case of orders passed by the Appellate AAR, the
mechanism for a further appeal does not exist in the statute”; To arrive at this conclusion, AAAR relies on
dicta of HC in JSW Energy Ltd. and Jotun India Pvt Ltd. AAAR observes that, “Any attempt by the Court to
examine the orders of the Appellate Authority for Advance Ruling on their substantive merits or demerits
will amount to enlarging the supervisory power of the High Court under Article 226/227 of the
Constitution into an appellate power. Any challenge to the order passed by the Appellate Authority for
Advance Ruling before the High Court in writ proceedings will have to be confined to a judicial review
which will inter alia include the issue as to whether there has been a failure of natural justice at the
appeal stage thereby vitiating the decision-making process leading to the making of the order by the
Appellate Authority for Advance Ruling.”; Accordingly, dismissing other contentions on why the vouchers
cannot be termed as 'gifts' given to the customers, rejects appeal:AAAR KAR

Decision Summary
The order was passed by Smt. Ranjana Jha and Smt. Shikha C.

Senior Advocate Tarun Gulati, Advocate Kishore Kunal appeared on behalf of the Appellant.

Cases Referred
• AAR: Rejects Myntra’s ITC claim on vouchers supplied FoC to customers under

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loyalty program
• TS-470-AAR(KAR)-2022-GST
• HC: Supply of ‘Vouchers’ not goods or services, but ‘Instrument' like 'Money’;
Quashes AAR/AAAR order
• TS-23-HC(KAR)-2023-GST

Case Law Information

Appellant/Applicant/Complainant Name
• Myntra Designs Pvt Ltd

Counsel of Appellant/Applicant/Petitioner
• Tarun Gulati
• Kishore Kunal

Authority Level & Location

• Appellate Authority for Advance Ruling Karnataka

Date of Pronouncement
• 2023-02-24

Ruling in favour of
• Petitioner

Judges
• Ranjana Jha
• Shikha C

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