Appellants were in the\u00a0 business of\u00a0 providing pre-printed paper meal vouchers to the customers with whom an agreement was entered into and who were establishments with number of employees. The customers paid the price equivalent to the face value of the vouchers and also service charges at specified percentage. The vouchers known as \u201csodexo\u00a0 meal vouchers\u201d were\u00a0 given over\u00a0 to the employees of such establishments who redeemed them with affiliated establishments such as restaurants, shops, departmental stores etc. for purchase\u00a0\u00a0\u00a0 of food, gifts etc. with whom the appellants had made arrangements. The said affiliates presented the vouchers to the appellants and were reimbursed with the cost thereof after recovery of service charges.<\/p>\n
The said vouchers were circulated under the authorization by RBI to operate a payment system based on \u201cpaper based vouchers\u201d under section 7 of the \u201cPayment and Settlement Systems Act, 2007\u201d. Appellants were also required to adhere to\u00a0\u00a0\u00a0 the Prepaid Issuance &operations of the Payment Instruments (Reserve Bank) Directives, 2009 and Consolidated Guidelines, 2014 thereunder. The payment instruments introduced by this Act merely facilitates the purchase of goods and services up to the value mentioned on such instruments. The amount paid by\u00a0\u00a0\u00a0 the customers was strictly required to be kept in escrow account and used to reimburse the affiliates for sales effected by them against such vouchers. RBI as\u00a0\u00a0\u00a0\u00a0\u00a0 a regulator had strict control over operation of the scheme.<\/p>\n
The appellants resisted the levy of LBT on the vouchers since according to them, the system of vouchers was introduced only for providing service. The High Court negated the contention on the ground that vouchers were \u201csold\u201d to the establishments and then distributed to their employees who in turn purchased<\/p>\n
\u00a0<\/p>\n
\u00a0<\/p>\n
goods against such vouchers. In the opinion of the High Court, the vouchers were capable of being sold after entering the limits of Municipal Corporation. Therefore, they were \u201cgoods\u201d within the meaning of sec. 2(25) of the Maharashtra Municipal Corporation Act (1949 Act) and hence, liable to LBT.<\/p>\n
\u00a0<\/p>\n
The Supreme Court considered the provisions and objectives of the \u201cPayment and Settlement Systems Act, 2007\u201d under which the vouchers were issued. The Court found that the system was introduced only to facilitate the provision of meals and other essentials to the employees of the organizations\u00a0 and the activity was purely in the nature of service. The appellants were merely a facilitator or medium through which the service was provided to bridge the gap between customers and affiliates. The vouchers could not partake the nature of goods. High Court had\u00a0 erred in treating the vouchers as goods.<\/p>\n
The Court also examined the provisions of 1949 Act and observed that LBT is a\u00a0\u00a0 tax on the \u201cgoods\u201d which enter the municipal limits for the purpose of sale, use\u00a0\u00a0\u00a0\u00a0 or consumption. If vouchers do not bear the character of \u201cgoods\u201d, then no LBT\u00a0 \u00a0can be levied thereon. Under Income Tax\u00a0 Act as well, the distribution of vouchers\u00a0\u00a0\u00a0 is considered as \u201cperquisites\u201d and therefore, they cannot be considered as \u201cgoods\u201d.<\/p>\n
\u00a0<\/p>\n
\u201csodexo meal vouchers\u201d are not \u201cgoods\u201d and not liable to Local Body Tax.\u00a0 (CA\u00a0\u00a0\u00a0 No. 4385-4386 of 2015 dt. 9-12-2015)<\/p>\n
\u00a0<\/p>\n
Editorial<\/em><\/strong>: The ratio of this judgment lays down that vouchers when used merely\u00a0\u00a0 to facilitate the payment for goods or services, are not \u201cgoods\u201d by\u00a0 themselves and not liable to sales tax. However, CGST\/SGST Act defines \u201cvoucher\u201d under section 2(118) to mean \u201can instrument where there is an obligation to accept it as consideration or part consideration for a supply of goods or services or both and where the goods or services or both to be supplied or the identities of their potential suppliers are either indicated on the instrument itself or in related documentation, including the terms and conditions of use of such instrument\u201d.<\/em><\/p>\n Thus, the voucher itself is\u00a0 not \u2018good\u2019 but used to\u00a0 facilitate supply of\u00a0 goods\u00a0\u00a0\u00a0 or services. The said Acts also defines the timeof supply in case of issue of<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n vouchers by the supplier both under sections 12 and 13. It is the date of issue\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 of the voucher when supply is identifiable at that point or date of redemption,\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 in any other case.<\/p>\n \u201cI have not a shadow of a doubt that society\u00a0\u00a0\u00a0 would be much cleaner and healthier if there was less resort to law courts than there is.\u201d<\/em><\/p>\n – Mahatma Gandhi<\/p>\n \u00a0<\/p>\n","protected":false},"excerpt":{"rendered":" Maharashtra Municipal Corporation Act , 1949
\n S. 2(31A): Local Body Tax ( LBT) – Goods for levy of Octroi or Local Body Tax – Entry of Sodexo meal vouchers into the municipal limits of Mumbai-whether liable to LBT which is tax on entry of the \u201cgoods\u201d for use, sale or consumption-meal vouchers issued to customers for definite value which are meant for distribution amongst their employees- employees visit the affiliated restaurants, departmental stores, shops etc which are affiliated-Vouchers are not \u201cgoods\u201d and are not liable to Local Body Tax. [ S. 2(25 ), 2 (42) ]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[5],"tags":[],"class_list":["post-13136","post","type-post","status-publish","format-standard","hentry","category-gst-law"],"acf":[],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p9S2Rw-3pS","jetpack-related-posts":[],"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/13136","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/comments?post=13136"}],"version-history":[{"count":1,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/13136\/revisions"}],"predecessor-version":[{"id":13137,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/13136\/revisions\/13137"}],"wp:attachment":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/media?parent=13136"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/categories?post=13136"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/tags?post=13136"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}