The most effective word in the world would be Free and the another closer would be Discount. Since people like to feel that they had saved money while doing a purchase of goods or claiming services at a discount and would go with a good deal.
You too felt good when you bought the food at a 10% discount on the deal. The before discount would direct that there would be a 50% off, you could proceed to buy the article for Rs 500 at Rs 250.
However, you would consider as at the current time the sellers would become creative and have initiated to furnish the discounts in the form of Gift cards/vouchers. Not only through the supplier of the specified product or services but also through the third-party trader vouchers would get provided.
Does the consumer would counted for the taxable transaction beneath the GST regime if the vouchers would get traded? Rather than the third parties is it more advantageous for the goods seller to furnish the vouchers to the consumer? Under the experience of different heads, the article would have the purpose to answer these sorts of questions.
Under GST What Would be the Vouchers?
Prior to arriving at the GST taxability, let’s comprehend the terms of a gift card/ voucher. A gift card would have no description under the GST act and the vouchers would count under the Central Goods and Service Tax Act, 2017 (“CGST Act”). Under Section 2(118) of the CGST Act, a voucher would be described as:
“Voucher” signifies an instrument in which there is a responsibility to accept it as consideration or part consideration for the supply of goods or services or both, in which the goods or services or both be supplied or the identities of their good suppliers are either displayed on the instrument itself or in corresponding documentation, along with the terms and conditions for the utilization of these instruments.
The aforementioned description would signify that a voucher would comprise the 2 important specifications. Below are the mentioned ones.
- The same should be the instrument where it would be the liability to accept it as a consideration or the portion of the consideration for the supply.
- The supply or the suppliers should be shown in the instrument or the concerned documents.
Hence the voucher would be furnished via the consumers for attaining the underlying goods/ services. A person can believe that operations executed via vouchers would be that of the money and money itself would not be included under the CGST act by virtue of Section 2(52) (meaning of goods) and Section 2(102) (meaning of services) of the CGST Act as money is not any good or service. But the same would not be correct. Under section 2(75) of the CGST act the money would be described as:
“Money” denotes the Indian legal tender or any foreign currency, cheque, promissory note, letter of credit, bill of exchange, draft, pay order, money order, traveller cheque, postal or electronic remittance, or any other instrument recognized by the Reserve Bank of India when used in consideration to settle an obligation or exchange with Indian legal tender or another denomination but will not possess any currency that is held for its numismatic value.
Hence we could see that a pre-paid instrument such as a voucher would not comprise in the description of the money Under the CGST act and hence, the voucher would not be the money and does not count under the CGST act.
Would the Voucher Count Under the Supply?
It is another question to learn is if a voucher or a supply counts under the GST. A supply signifies a supply of goods or services or both, under section 7 of the CGST act. Under Section 2(52), the term goods would be described as:
“goods” would direct that every type of moveable property excluding money and securities but contains actionable claims, growing crops, grass, and things attached to or forming a part of the land which are decided to be provided prior to supply or under the supply contract.
Under Section 2(102), the services would be described as:
“Services” renders that anything excluding goods, money, and securities but comprises exercises concerned with the use of money or its conversion via cash or through any other mode, from one form, currency, or denomination, to another form, currency, or denomination for which a separate consideration is charged.
Description- Answering the queries, it is defined that the expression “services” consist of easing or arranging transactions in securities;
On learning the definition of the goods, services, and vouchers as cited above we could see that the parliament would not remark on the voucher.
But, with reference to the time of supply of goods (Section 12) and services (Section 13), vouchers would be dealt with as a different class.
“Section 12. Time of Supply of Goods: (4) In case of a 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….”
Section 13 would mentioned that-
“Section 13. Time of Supply of Services- …(4) In case of a 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….”
As vouchers constitute a supply, the parliament was with the intention that a voucher could be counted as a good or service.
Vouchers Trading as a Supply
A voucher might be utilised in 2 ways:
- In which the voucher is used by the final consumer for buying the underlying goods or services.
- In which the vouchers would be traded via the entity to make a profit.
Case 1: In which the voucher would be utilised via the final consumer
For the case when the consumer would show the voucher to the seller for the goods or services supply however the same could not be mentioned that the customer would incur a supply to these shopkeepers since the same would not during or furtherance of the business.
In the case of Sodexo SVC India (P) Ltd v. State of Maharashtra, the Supreme court ruled that vouchers would not be the goods, in the voucher, the trading transactions would not be the sale of the transaction or goods or services supply as the voucher counts as payment instruments or consideration for the sale or the supply of goods or services at the coming date.
The same is been concluded via the Supreme court that the Sodexo coupons would be furnished via the employer to the employees to claim the utility of the food and the non-alcoholic beverages. The prerequisite furnished within employees through choosing the way of the vouchers and hence could not entitle to be as goods for the charge of the local body tax and octroi provided that the concerned that their vouchers were not be traded or sold separately:
“25. We may mention here that the appropriate test would be as to whether such vouchers can be traded and sold separately. The answer is negative. Therefore, this test of ascertaining the same to be “goods” is not satisfied.”
There would be no tax levied for the vouchers used by the individual for taking the underlying goods or services, said Apex court.
Case 2: Where the vouchers are traded by an entity to earn profit
For the same concern the observation of the AAAR, Karnataka for the case of Premier Sales Promotion (P) Ltd, In re, [2022] (AAAR- Karnataka) would count as appropriate in which the same was ruled that a voucher when supplied via 3rd party and does not the issuer itself of the voucher, would become effective in the hands of that 3rd person.
These types of vouchers would count under the pre-paid instrument if it is utilised to perform the payment by the end consumer and not before that hence on these vouchers GST would be applicable on the trades. But the same was the case in which the underlying supply was effective. What would happen when the underlying commodity would count as a service?
For the concern, the case of Kalyan Jewellers India Ltd., In re. [2021], would be related in which the Tamil Nadu AAAR ruled, a voucher would be treated as an instrument of consideration and not any goods or services. It would not be categorized on separate grounds however merely the supply related to the voucher would be categorized as per the type of goods or services in exchange for the voucher before being provided to the consumer.
Hence, if a voucher is traded it is liable for tax and it relies on the underlying supply that the voucher would be the good or service.
GST Rate on the Trade of Vouchers
We would arrive at the conclusion that if a voucher would levy to tax under GST if traded via a non-issuing 3rd party, the subsequent question arises, what tax rate would be levied on vouchers? As vouchers are not listed in Notification No. 01-2017- Central Tax Rate, on 28.06.2017, they shall be levied to tax beneath the residue head under Entry No. 453 of Schedule III of Notification No. 01-2017- Central Tax (R), dated 28.06.2017 at 18% rate.
Closure
From the aforementioned discussion, the closure arrived is that if a voucher or a gift card would get provided to you in any way for instance through Amazon then you are not needed to file GST on the voucher itself, but only for goods or services. But if the third party traded the voucher then the transaction would apply for the tax under GST and all the complaints referred to that would need to proceed.
