GST on Vouchers - Analytical Study
The treatment of vouchers under GST has been a subject of debate due to their unique nature. This article provides an analytical study of GST applicability on vouchers, covering definitions, classifications, taxability, and judicial perspectives.
Definition- As per section 2(118) of CGST Act, "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.
From the definition of Voucher under section 2(118) of CGST Act, it emerges that “Voucher” may be in nature of payment instrument which creates an obligation on the supplier to accept it as a consideration or part consideration for the supply of goods and/or services.
Classification of vouchers- Clarification on treatment of voucher has been issued via circular no. 243/37/2024-GST Dated 31st December, 2024 which can be summaries as follows-
When vouchers treated as pre-paid instruments (PPI) by RBI |
- It falls under the definition of Money.
- Money is neither good nor service
- Therefore, GST is not applicable
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When vouchers not treated as pre-paid instruments (PPI) by RBI |
- Falls under the definition of actionable claims
- Actionable claim are treated as goods
- However, actionable claims are outside the scope of supply as per para 6 of Schedule III
- Therefore, GST is not applicable
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Voucher under Principal-to-Principal (P2P) Model |
Voucher trading under the P2P model is not a supply of goods or services
No GST applicable as vouchers trading is either supply of actionable claims as mentioned in Para 6 of Schedule III or transaction in money which is neither goods nor service |
Where Vouchers are distributed using distributors/ sub-distributors/ agents on commission/ fee basis
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In such cases, GST would be payable by such distributor/sub-distributor/agent, acting as an agent of the Voucher issuer, on the commission/fee or any other amount by whatever name called, for such purpose, as a supply of services to the Voucher issuer.
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Where additional services such as advertisement, co-branding, customization services, technology support services, customer support services, etc. are provided by either the distributor/ sub-distributor or by another person to the Voucher issuer against a service fee/ service charge/ affiliate charge or any other amount
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In such a case, the said service fee/ service charge/ affiliate charge or other amount for supply of such additional services to the Voucher issuer as per the terms of contract/agreement, would be liable to GST at the applicable rate in the hands of the said service provider. |
Unredeemed Vouchers |
In the case of breakage, there is no redemption of Voucher and there is no supply of underlying goods and/or services. Therefore, there is no supply of goods and/or services on account of such unredeemed Vouchers (breakage).
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Time of supply of vouchers
1) Related to supply of goods- As per section 12(4) of CGST Act, 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.
2) Related to supply of service- Further, as per section 13(4) of CGST Act, 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.
However, Sub-sections (4) of section 12 and Sub-sections (4) of section 13 relating to time of supply in respect of vouchers are being omitted via Finance Bill, 2025 to resolve ambiguities in the treatment of Vouchers.
Since GST applies to the actual supply of goods and services, the concept of time of supply for vouchers become irrelevant, thereby omitted.
This simplifies the taxation of vouchers and eliminates uncertainty in digital and prepaid voucher transactions.
Relevant Judgments-
If the “Gift Voucher/ Card” was issued for any unspecified goods to be purchased on a future date from a whole range of products/goods/merchandise offered for sale by the petitioner, tax is payable on such “goods” or “merchandise” only at the time of sale i.e. at the time of redemption of “Gift Voucher/Card” in view of section 12(4)(b) of the respective GST Enactments- MADRAS HIGH COURT [2023] 66 TAXLOK.COM 159 (Madras)
Vouchers do not fall under the category of goods and services and they are exempted from levy of tax- KARNATAKA HIGH COURT [2023] 56 TAXLOK.COM 103 (Karnataka)
The time of supply of the gift Vouchers / gift cards by the applicant to the customers shall be the date of issue of such Vouchers and the applicable rate of tax is that applicable to that of the goods- TAMIL NADU-AAAR [2021] 34 TAXLOK.COM 127 (AAAR-Tamil Nadu)
When the Vouchers intended to be procured by the Appellant is neither goods nor service, the question of eligibility of input tax credit does not arise- KARNATAKA-AAAR [2023] 57 TAXLOK.COM 084 (AAAR-Karnataka) |