TAXATION OF VOUCHERS UNDER GST

Slowly and steadily we have approached a scenario where on every transaction we make we receive certain vouchers which essentially are a form of discount that we might get when such a voucher is redeemed. Now in GST era host of issues have come up leading to confusion among taxpayers regarding taxability, rate of tax and time of taxation. Through this article let`s try to clear some of the issues relating to meaning, taxability and time of taxation of vouchers.

Definition [Section 2(118)]-

(118) “voucher” means an 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;

Taxability of Vouchers-

Time of supply of vouchers is determined in accordance with section 12/13 of the CGST Act, 2017. Relevant extracts of the provisions are reproduced as under-

Section 12(4)-

12(4) In case of supply of vouchers by a supplier, the time of supply shall be—

(a) the date of issue of vouchers, if the supply is identifiable at that point; or

(b) the date of redemption of vouchers, in all other cases.

Section 13(4)

13(4) In case of supply of vouchers by a supplier, the time of supply shall be—

(a) the date of issue of voucher, if the supply is identifiable at that point; or

(b) the date of redemption of voucher, in all other cases.

While on one hand section 12 deals with taxation of vouchers in case of goods, on the other hand section 13 deals with taxation of vouchers in case of services. Never the less provisions of both the section are more or less similar and are mirror images of one another.

So in case if the voucher is to be redeemed against a specific goods/services which are determinable at the time of issue of vouchers then the value of such vouchers shall become taxable immediately on issuance of such vouchers. For example, if you buy certain item from Reliance Trends and they issue voucher which can be redeemed at Trends Footwear against purchase of formal shoes. In this case since the goods against which the voucher can be redeem is identifiable at the time of issuance of such voucher the voucher shall get taxed immediately upon issue.

Whereas in case Reliance Trends issues voucher which can be redeemed against any product available in the Trends store then since the ultimate supply of goods is not identifiable at the stage of issuance of voucher, it shall ultimately get taxed at the time when the voucher is subsequently redeemed.

However recently an interesting development arose when Karnataka High Court in case of Premier Sales Promotion Pvt Limited [2023] 56 TAXLOK.COM 103 (Karnataka) held as under-

“21. It is not in dispute that the vouchers involved in the instant petition are semi-closed PPIs in which the goods or services to be redeemed are not identified at the time of issuance. Vouchers are distributed to its employees or the customers which can be redeemed by them. These PPIs do not permit cash withdrawal, irrespective of whether they are issued by banks or non-banking Companies and they can be issued only with the prior approval of RBI.

22. In substance the transaction between the assessee and his clients is procurement of printed forms and their delivery. The printed forms are like currency. The value printed on the form can be transacted only at the time of redemption of the voucher and not at the time of delivery of vouchers to assessee’s client. Therefore, the issuance of vouchers is similar to pre-deposit and not supply of goods or services. Hence, vouchers are neither goods nor services and therefore cannot be taxed.”

It has been held that voucher are neither goods nor services and as per section 9 of the CGST Act, 2017 GST can only be charged on supply of goods and/or services and since the voucher fails to be both it goes outside the ambit of GST. Relevant provisions of section 9(1) are reproduced as under-

“(1) Subject to the provisions of sub-section (2), there shall be levied a tax called the central goods and services tax on all intra-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption, on the value determined under section 15 and at such rates, not exceeding twenty per cent., as may be notified by the Government on the recommendations of the Council and collected in such manner as may be prescribed and shall be paid by the Taxable person.”

A lot more clarify is required on the issue of vouchers and the dispute between the government and taxpayers on the taxation of voucher may still continue for a substantial period.