Taxability of gift cards or vouchers under GST gets better clarity

The Appellate Authority for Advance Ruling (AAAR) of the Tamil Nadu bench has clarified that the Goods and Services Tax (GST) must be levied on the underlying goods or services at the time of redemption of pre-paid instruments given as gifts or vouchers.

The AAAR, a quasi-judicial body under GST, has recently expressed the issues and the path forward concerning taxation of gift cards and vouchers by various shopping outlets. M/s Kalyan Jewellers India Limited filed an appeal with the Appellate Authority for Advance Ruling against a Tamil Nadu state Authority for Advance Ruling (AAR) ruling. 

The Tamil Nadu authority had stated that GST would be imposed at 12% or 18% depending on whether the pre-paid instruments were based on paper or magnetic strip, respectively. Accordingly, as per the PTI report, the AAAR has clarified that GST will be imposed not on the issue of vouchers but on the underlying supply of goods or services at the time of its redemption. The time for GST payment will be determined by the provisions detailed in the GST law.

The AAAR stated in its order that vouchers are neither goods nor services and that the GST law recognises them as a kind of non-monetary consideration for future supply.

“Since a voucher is just an instrument of consideration and not a product or service, it cannot be classified separately. Only the supply associated with the voucher can be classified based on the quality of the products or services provided in return for the voucher previously given to the consumer,” the AAAR stated.

The taxability of gifts and vouchers has always been in cloudiness since the pre-GST regime. The particular ruling by the authority has given much-needed clarity to many businesses.

For any clarifications/feedback on the topic, please contact the writer at annapoorna.m@cleartax.in

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