Whether The Act Of Supplying Vouchers Is Taxable? And If Yes Then At What Rate Will It Be Taxable?

Facts:

• Appellant is engaged in trading of vouchers like gift vouchers, cash back vouchers and multi option vouchers.
• The Appellant procures/purchases several types of vouchers which are redeemable at specified merchants.
• Aggrieved by the earlier ruling given by the AAR, the Appellant has filed appeal to Appellate Authority for Advance Ruling, Karnataka.

Legal Precedence

In M/s Premier Sales Promotions Pvt. Ltd.- (AAAR – KARNATAKA) [22-12-2021]

If an entity is engaged in trading of vouchers i.e. procuring of vouchers and selling the same, then it will attract GST.

Vouchers will fall under the category of “Goods” and will be taxed at 18%.

Points Put Forth:

• The Appellant submitted that the AAR has erred in classifying the vouchers as goods for the obvious reason that the vouchers are only instruments which carry along with them a promise to pay or promise to supply goods and services and the ultimate supply of goods or services happens only when the final customer makes use of such vouchers by following the procedures and conditions attached to it.
• The Appellate Authority for Advance Ruling, Karnataka observed that the Appellant is purely trading in vouchers. The vouchers get transferred from the person who first purchases the voucher from the issuer to the ultimate beneficiary who redeems the voucher. Appellate Authority further stated that money is outside the scope of GST and vouchers only qualify as money when they are redeemed. Therefore, Appellant who only trades vouchers cannot be termed as ‘money’ & comes under the nature of goods.
• Also, actionable claims other than lottery, betting and gambling are neither treated as supply of goods nor as supply of services. Further, the Appellate Authority find that the vouchers are not a claim to any debt. However, the voucher is in the possession of the claimant at the time of the claim and hence it cannot be considered as actionable claim.

Judgement:

It was ruled that that the vouchers traded by the Appellant are goods and not actionable claims. Since, the supply of vouchers by the Appellant is a supply of goods in terms of Section 7 of the CGST Act and are subject to 18 percent GST. The Appellate Authority for Advance Ruling, Karnataka upheld the decision of the AAR and dismissed the case.

Hrithik Sachdeva, Audit Associate, SW India