Introduction
The Goods and Services Tax (GST) Act of 2017 revolutionized India’s tax framework, simplifying the tax regime while introducing new legal concepts. Among these is the notion of ‘actionable claims,’ a term that has sparked discussions and legal scrutiny. This blog delves into the definition, legal treatment, and case laws surrounding actionable claims under the GST Act.
What is an Actionable Claims?
Section 1(2) of CGST Act 2017 defines “actionable claim” shall have the same meaning as assigned to it in section 3 of the Transfer of Property Act, 1882 (4 of 1882); and in Section 3 of TPA Act it defines “ actionable claim” means a claim to any debt, other than a debt secured by mortgage of immoveable property or by hypothecation or pledge of moveable property, or to any beneficial interest in moveable property not in the possession, either actual or constructive, of the claimant, which the Civil Courts recognise as affording grounds for relief, whether such debt or beneficial interest be existent, accuring, conditional or contingent;]
An actionable claim is a claim to any debt, other than a debt secured by mortgage or hypothecation, or to any beneficial interest in movable property not in possession, actual or constructive, of the claimant. It is a claim recognized by law as providing grounds for relief.
Actionable Claims and GST Act: The Legal Stance
The GST Act categorizes actionable claims, excluding lottery, betting, and gambling, as neither goods nor services. This classification exempts most actionable claims from GST, a relief for entities dealing with such claims.
Key Case Laws Shaping the Understanding
The interpretation of actionable claims under GST has been influenced by several court rulings. A pivotal case is Nexus Innovative Solutions Pvt. Ltd.’s challenge against a GST assessment on vouchers. The company argued that vouchers are actionable claims and not taxable supplies. The Madras High Court’s decision to set aside the assessment order has become a cornerstone for similar legal arguments. Important points of the case in given below:
- The petitioner, M/s. Nexus Innovative Solutions Private Limited, engaged in the business of managing and implementing reward programs for corporate clients, which includes buying and selling gift vouchers on behalf of clients such as Amazon.
- The petitioner received a show cause notice dated 04.09.2023, which was replied to on 04.10.2023 and 30.11.2023. The order in question, dated 28.12.2023, imposed GST on vouchers supplied by the petitioner.
- The petitioner argued that they are not the supplier of the goods underlying the vouchers and that their role is limited to that of an intermediary. They relied on the judgment of the Karnataka High Court in Premier Sales Promotion Pvt. Ltd. v. Union of India 2023(70) GSTL 345 (Kar) and the recent judgment of the Madras High Court in Kalyan Jewellers India Limited v. Union of India and others, order dated 27.11.2023 in W.P.No.5130 of 2023 to support their case.
- The impugned order, issued by the respondent, confirmed the demand of Rs.7,74,21,911/- (IGST-Rs.4,11,08,934/-, CGST-Rs.1,81,56,489/- & SGST-Rs.1,81,56,489/-) in relation to the supply of vouchers. The respondent concluded that vouchers are actionable claims, which are included within the definition of goods under Section 2(52) of the CGST Act, and therefore subject to GST.
- The High Court set aside the impugned order only insofar as it relates to the imposition of GST on vouchers. The issue is remanded for re-consideration by the respondent, who is directed to issue a fresh speaking order after duly taking note of and dealing with each contention raised by the petitioner. The fresh order should be issued within two months from the date of receipt of a copy of the High Court’s order.
Implications for Businesses and Tax Professionals
The legal precedents set by such cases have significant implications for businesses and tax professionals. They provide a framework for understanding the taxability of instruments like vouchers and tokens under GST.
The Future of Actionable Claims under GST
As the GST regime evolves, further legal interpretations and guidelines are anticipated. These will clarify the ambit of actionable claims, aiding compliance and reducing litigation.
Conclusion
The concept of actionable claims under the GST Act is a testament to the evolving nature of tax laws. The case laws discussed offer valuable insights into the legal treatment of actionable claims, guiding businesses and professionals in navigating the GST landscape.
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