When it comes to whether Gift Vouchers are taxable or not, there have always been doubts. Clearing the air about whether gift vouchers are taxable or not, the Tamil Nadu Bench of the Appellate Authority for Advance Ruling (AAAR) held that ‘Gift vouchers’ are taxable and shall come within the domain of Goods and Services Tax.
Now the second question that crops up is when (at what time) Gift Vouchers are taxable – At the time of receiving or at the time of its use. The aforesaid Honourable Court ruled that the GST shall be levied on Gift Vouchers at the time of redemption of such pre-paid instruments.
Earlier, Kalyan Jewellers India Ltd had approached the AAAR against the ruling delivered by the Tamil Nadu state Authority for Advance Ruling (AAR) which held that GST of 12 percent or 18 percent shall be levied that shall depend on whether such pre-paid instruments are paper-based or magnetic strip based respectively. However, altering the AAR verdict, the AAAR held that vouchers are neither goods nor services and the law of GST acknowledges/recognises it as an instrument of consideration (non-monetary form) for future supply.
The AAR said that “Since a 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 for the voucher earlier issued to the customer.”
And Jain added that “This Appellate Authority for Advance Ruling (AAAR) ruling is welcome and has provided appropriate clarity to the industry on the taxability of vouchers,”
So the above ruling takes us to the conclusion the Gift Vouchers are subject to GST at the time of their redemption.
