GST Update on Gift Vouchers Liable to be taxed at 18%

In today’s era, supply of various vouchers such as gift vouchers, cash back vouchers is very common and the moot question lies as regards their taxability in GST, valuation, time of supply and the rate of GST applicable. This issue was extensively dealt with recently by hon’ble Karnataka AAR in the case of M/s Premier Sales Promotion Pvt. Ltd. [KAR ADRG 37/2021 dated 30.07.2021]. The applicant asked two questions to the AAR- 1. Whether supply of vouchers is taxable and 2. If yes, the rate of GST applicable on the same. The outcome of this ruling is the subject matter of discussion of our present update.
The applicant is involved in the trading of vouchers in the course or furtherance of its business.With respect to gift vouchers, AAR noted that the applicant purchases the said vouchers and sells the same to its clients, who in turn distributes them to their customers and the customers use them to discharge their obligation to pay consideration for goods or services procured by them from their suppliers. It was contended by the applicant that the above activity amounts to transaction in money or it should be considered as actionable claim which is covered under Schedule III to CGST Act, 2017 as neither supply of goods nor supply of services. However, the AAR observed that the said vouchers are although instruments recognized by RBI but cannot be covered under the definition of "money" as they are not used for settling obligation for payment of consideration between applicant and the client but rather are used for payment of consideration for supply of goods or services procured by end-user. Moreover, it was also held that since vouchers are not debt, they cannot be considered as ‘actionable claim’ not liable to GST. The AAR categorically held that transaction of trading of vouchers for consideration is supply and liable to GST as goods can be both tangible and intangible. The AAR also discussed the specific provisions contained in section 12(4) & (5) for determining time of supply in case of supply of vouchers. It was held that the supply of vouchers, including e-vouchers would attract GST at the rate of 18% as per entry no. 453 of Schedule 3 of the Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017.
In this context, reference is invited to the decision pronounced in the case of M/s KALYAN JEWELLERS wherein Tamil Nadu AAAR has held that the Gift vouchers or pre-paid instruments are neither goods nor services, but instruments of consideration and so GST is not applicable on the supply of vouchers, but on the underlying supply of goods/services at the time of redemption.
Time and again, it is proved that AAR is unsettling the settled issues and giving pro-revenue decisions. It is submitted that a voucher gets its worth from the underlying goods or services redeemable against them. When GST is leviable on the supply of goods or services against vouchers, the supply of vouchers should not attract GST. Therefore, the CBIC must come out with appropriate clarification in this regard.

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GST Update on Gift Vouchers Liable to be taxed at 18%

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