The court says that under the CGST Act, vouchers are payment instruments falling under the definition of ‘money’, which is excluded from the definition of goods and services.
The Karnataka High Court has ruled that cashback and gift vouchers do not attract GST as they do not come under the definition of goods and services.
A bench of Justices P S Dinesh Kumar and Shivashankare Gowda gave the ruling on January 16 while hearing a petition filed by Premier Sales Promotion, which procures vouchers and supplies them to clients at their face value. The clients issue them to their employees as incentives.
When asked whether the vouchers or the act of supplying them was taxable and at what stage and at what rate, Karnataka’s Appellate Authority for Advance Ruling replied to the petitioner that the vouchers were taxable as goods and in all cases would be governed by the Central Goods and Service Tax (CGST) Act and central tax notification of June 28, 2017.
The petitioner, however, argued in the court that the vouchers were in the form of a prepaid payment instrument, where the goods and service are not specified. They will remain so only until they are presented for redemption and represent an “actionable claim”, which does not come under the umbrella of goods and services under the Act, the petitioner further argued.
The respondents contended that as the petitioner knew what was offered to the customer, it could not be said that the goods were not specified or identified.
But the bench held that “the definition of ‘vouchers’ as defined under the CGST Act makes it clear that vouchers are mere instruments accepted as consideration for the supply of goods or services. They have no inherent value of their own. As vouchers are considered instruments, they would fall under the definition of ‘money’, defined under the CGST Act. The CGST Act excludes ‘money’ from the definition of goods and service and therefore not leviable to tax”.
The bench thus held that vouchers would be exempt from GST.
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Frah Saeed is a law graduate specializing in the core field of indirect taxes and is the Co-founder of taxwallah.com. She has authored many publications on GST and is into full-time consultancy on GST to big corporates. She as a part of taxwallah.com heads a team comprising of Chartered Accountants and Advocates and plays a key role in our mission to disseminate GST knowledge to all.
