NEW DELHI: Putting all confusion to rest over taxability of gift cards or vouchers such as the ones by Shoppers Stop or Amazon, the Tamil Nadu bench of the Appellate Authority for Advance Ruling (AAAR) has ruled that GST would be levied on the underlying goods/ services at the time of redemption such pre-paid instruments.
The recent AAAR order stated that the time of supply of gift vouchers or gift cards shall be the date of issue and further clarified that GST will be levied not on the supply of vouchers but on the underlying supply of goods and services at the time of redemption.
What added to the confusion was a separate order which said vouchers itself will be taxable. In fact, the earlier ruling on the issue also meant that different cards were taxed differently. Kalyan Jewellers India Ltd has approached the AAAR against the ruling by the Tamil Nadu state Authority for Advance Ruling (AAR), which had said that GST at 12 per cent or 18 per cent would be levied depending on whether such pre-paid instruments were paper based or magnetic strip based respectively.
Modifying the AAR verdict, the AAAR has clarified that GST will be levied not on the supply of vouchers but on the underlying supply of goods/ services at the time of redemption and the time for payment of GST will be dependent on the provisions detailed in the GST law. In its order, the AAAR said that vouchers are neither goods nor services and the GST law recognises it as an instrument of consideration (non-monetary form) for future supply.
“… since voucher is only an instrument of consideration and not goods or services, the same is not classifiable separately but only the supply associated with the voucher is classifiable according to the nature of the goods or services supplied in exchange of the voucher earlier issued to the customer,” the AAAR said. Abhishek Jain, tax partner, EY India said the taxability of vouchers has always been a grey area, both under the pre- GST and post GST regime.
“This AAAR ruling is welcome and has provided appropriate clarity to the industry on the taxability of vouchers,” Jain added. Supply of goods or services is very essential to the GST framework. This is mainly
because GST is a consumption based tax where everyone that adds value only pays tax on that portion.