Taxability of Vouchers, Coupons, Gift Card, Prepaid Card
- CA Shubham Sawal
It is seen in normal business practice followed by the business houses and other corporates to issue vouchers, coupons, gift card to various vendors, employees, customer and other stake holder.
Various question in relation to GST arises, some of the are listed below: –
- Whether there is levy of GST on vouchers, coupons and other prepaid instruments?
- What shall be Time of Supply of these instruments if levy of Tax?
- Are there any specific rules for valuation of these?
To answer the above questions, we have first look at the definition of voucher as defined under section 118(2) of CGST Act-2017.
“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;
In simple words, Voucher is instrument used that can be used to procured goods and services.
To answer the above question,
First, we need to understand whether voucher is been acquired against any consideration or without any consideration. If it is without any consideration, then it doesn’t constitute supply and hence the question of GST doesn’t arise. However, it doesn’t mean that underlying goods and/or service which is redeemable against voucher is exempt from GST. For Proof Reading, see the extract of Section 7 of CGST Act-2017
For the purposes of this Act, the expression – “supply” includes-
- all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for aconsideration by a person in the course or furtherance of business;
Further if these instruments are acquired against consideration, then there is levy of GST.
Now the question arises on time of supply, valuation and rate of tax on these instruments.
Time of Supply(Section 12-13 of CGST Act-2017)
- If Goods/ service is identifiable at the time of issue of Voucher then time of Supply shall be date of issue of voucher.
- If Goods/ Service is not identifiable at the time of issue of Voucher then time of Supply shall be date of redemption of voucher.
Note: A common question can arise in the mind of readers in case (1) of the above that, it might result in double taxation. As there is levy of GST at the time of Issue/ redemption of voucher as well as at the time actual of Supply of goods/service.
In order passed by AAAT in case of M/s Kalyan Jewellers India Limited dated 30/03/2021 it has been held that underlying supply of Goods/ Service shall not be subject to tax at time of redeeming the voucher as supply is deemed to have been done at the time of issue of voucher itself (Section 12(4) & 13(4) of CGST Act-2017). Copy of the said advance ruling is enclosed herewith.
Valuation of Vouchers (Section 15 of CGST Act -2017)
Value of vouchers shall be transaction value i.e., price actually paid or payable in relation to supply, provided-
- Price is Sole Consideration
- Supplier and Recipient are not related person
Considering the above provision Vouchers are merely an instrument which is used in lieu of money for making the consideration for supply of goods or services. Thus, voucher in itself is not subject to GST. However, the underlying goods/ service which is supplied GST may be levied on it.
The view expressed are personnel. Author may be contacted at email@example.com
The copy of the order is as under: