GST Taxability of gift cards / gift vouchers/e-voucher

Complete understanding about the taxability of gift cards / gift vouchers Under GST.

FACTS OF THE CASE: 

Business of a company:- The Company is engaged in the business of trading of “Gift cards/ Gift voucher’s” etc. the company buys these “Gift cards/Gift Voucher” from different suppliers and sell them to retail or wholesale customers which includes B2B and B2C customers.

In view of the above, the questions put forward for our opinion is as follows:

Whether GST is applicable at the time of sale of ” e-voucher/Gift Card’s/Gift Vouchers”

CURRENT LEGAL POSITION: 

SUPPLY OF VOUCHERS AND ITS TAXABILITY UNDER GST

We would like to re produce Section 7 of Schedule III of GST Act as given below:

(1) For the purposes of this Act, the expression “supply” as per section 7 includes:

1. All forms of supply of goods and services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agree to be made for a consideration by a person in the course or furtherance of business,
2. Import of services for a consideration whether or not in the course or furtherance of business,
3. The activities specified in Schedule I, made or agreed to be made without a consideration

(2) Notwithstanding anything contained in Section 7(1),

1. Activities or transactions specified in Schedule III; or
2. Such activities or transactions undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities, as may be notified by the Government on the recommendations of the-council, shall be treated neither as a supply of goods nor a supply of services.

(3) Subject to the provisions of Sections 7(1) & 7(2), the Govt may, on the recommendations of the Council, specify, by notification, the transactions that are to be treated as-

• a supply of goods and not as a supply of services; or
• Supply of services and not as a supply of goods.

Schedule III to CGST Act 2017:

Activities or Transactions which shall be treated neither as a Supply of Goods nor a Supply of Services (Section 7)

(1) Services by an employee to the employer in the course of or in relation to his employment.

(2) The Services by any court or Tribunal established under any law for the time being in force.

(3) Following Services –

• Functions performed by the Members of Parliament, Members of State Legislature, Members of Panchayats, Members of Municipalities and Members of other local authorities;
• the duties performed by any person who holds any post in pursuance of the provisions of the Constitution in that capacity, or
• Duties performed by any person as a chairperson or a member or a director in a body established by the Central Govt or a State Govt or local authority and who is not deemed as an employee before the commencement of this clause.

(4) Services of funeral, burial, crematorium or mortuary including transportation of the deceased.

(5) Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building.

(6) Actionable claims, other than lottery, betting and gambling.

(7) Supply of goods from a place in the non-taxable territory to another place in the non-taxable territory without such goods entering into India.

(8) Under-mentioned supplies –

• Supply of warehoused goods to any person before clearance for home consumption;
• The Supply of goods by the consignee to any other person, by endorsement of documents of title to the goods, after the goods have been dispatched from the port of origin located outside India but before clearance for home consumption.

Actionable claims are only applicable for Goods, and not for services. Goods, as described in the CGST Act, are every kind of movable property other than money, but includes the claims.

The “Gift Card/Gift Vouchers” supplied, cannot be covered under the definition of “money” at the time of supplying them.

However they would take the color of money only when it is used for payment of consideration for the supply of goods or services procured by the end-user.

Reliance is placed on the following. Judgements:

• Honorable AAAR,   Tamil Nadu in Kaylan Jewelers India Ltd. [March 30, 2021] held that prepaid payment instruments fall under the definition of neither goods nor services but instrument of consideration.
• Observed that Gift Card /Gift voucher, being an instrument used as consideration to settle payment, is a type of money, and as long as such instrument is recognized by the RBI & even if it is not recognized by the RBI, it would still form a means of payment of consideration, though it does no constitute money under the definition in the CGST Act.
• Gift Card /Gift voucher issued are of the nature of actionable claims that is included within the definition of goods under Section 2(52) of the CGST Act and have been included in entry 6 of the Schedule III of the CGST Act and therefore, cannot be treated either as the supply of goods or supply of services. Hence, vouchers are not subject to levy of tax under the CGST Act.
• There ‘might not be any GST implications on the issuance of Gift Card /Gift voucher unless underlying goods or services are actually supplied as Consideration, which is received towards issuance of Gift Card /Gift voucher is in the form of deposit only.
• Further, Sections 12 and 13 of the CGST Act provides that time of supply in case of the Supply of vouchers by a supplier, shall be:

• • Date of issue of Gift Card /Gift voucher, if the supply is identifiable at that point;
  • The date of redemption of Gift Card /Gift voucher, in all other cases.
• GST law has defined Gift Card /Gift voucher and specified their time of supply. However, it is silent on whether issuance of a Gift Card /Gift voucher represents a supply of voucher per se or the goods or services to which it relates.
• AAR also held that time of supply of Prepaid Payment Instruments (PPIS) shall be the date of issue of PPIs,
• if the PPIs are specific to any particular goods or shall be the date of redemption of PPIs if the PPIs are redeemable against any goods bought.

Our opinion Taxability of gift cards / gift vouchers Under GST:

In light of the above, our opinion to the query raised is:

a) It is pertinent to note that Gift Card /Gift voucher shall entitle the holder to use it for redemption against goods or services and supplier is under obligation to accept it as a consideration or part consideration.

b) In addition to this tax is payable at the time of supply and Sections 12 and 13 of the CGST Act provide that time of supply In case of the supply of Gift Card /Gift voucher by a supplier, shall be:

                 (a) the date of issue of voucher, if the supply is identifiable at that point; or

                 (b) Date of redemption of voucher, in all other cases.

c) Also the suppliers of these Gift Card /Gift voucher’s who are renowned players in the industry are also not charging any GST at the time of purchase of said Gift Card /Gift voucher.

However, it is pertinent to note that wherever such Gift Card /Gift vouchers are exchanged in respect with goods or services are actually supplied as Consideration, being received towards issuance of Gift Card /Gift voucher shall be subject to GST under CGST Act 2017.

GST Rate on Gift Card /Gift vouchers/e-voucher :

• If paper based gift vouchers classifiable under CTH 4911 applicability of GST Rate is 6% CGST under the Sl.No. 132 of Schedule II & 6% SGST as amended.
• Other gift cards, the same are classifiable under CTH 8523 and GST rate applicable rate is 9% CGST as per Sl.No. 382 of Schedule III and 9% SGST as per Sl.No. 382 of Schedule III of Notification dated 29.06.2017.

Conclusion:

• Time of supply of goods is specified U/s 12 of TNSGST Act or CGST Act, & time of supply of vouchers is specified in Section 12(4); clearly indicating that vouchers are goods under CGST ACT.
• Hence according to GST ruled is GST leviable on issuance of such Gift Card /Gift vouchers.

GST Compliances Before Closing of Financial Year 2022-2023

• Reconciliation of Turnover & GST.
• Know your Supplier
• The Reconciliation of E-way Bill & E-Invoicing.
• Reconciliation of ITC in Books vs 3B vs 2B.

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