[Opinion] Understanding GST Implications on Vouchers and Gift Cards in India

Kishore Kumar – [2023] 156 taxmann.com 263 (Article)

In modern India, vouchers, gift cards and prepaid instruments redeemable against specific or multiple goods and/or services are becoming a new norm.

Also, companies, as a part of their brand promotion strategy, are increasingly adopting gifting vouchers and prepaid instruments to their channel partners or customers upon achieving specific targets. With this increasing use of vouchers and gift cards, examining the GST implications on supply of these vouchers and gift cards becomes essential.

The taxability of vouchers and gift cards under the GST law is quite complex. There are specific provisions under the GST law for the taxability of single-purpose and multi-purpose vouchers. To begin with, GST is a tax levied on the supply of goods and/or services.

Therefore, to levy GST on the issue or redemption of vouchers and gift cards, the same must be classified either as ‘goods’ or ‘service’.

‘Goods’ are defined under the GST law as every kind of movable property other than money and securities, including actionable claims. Further, the term ‘service’ has been defined under the GST law as anything other than goods, money and securities.

Vouchers have been defined under the GST law as an ‘instrument’ with an obligation to accept the same as consideration or part consideration for a supply of goods or services or both. Simply put, vouchers are construed as payment instruments used as consideration for procuring goods and/or services. Therefore, vouchers are often referred to as money or actionable claims.

The Hon’ble Supreme Court in Sodexo SVC India (P.) Ltd. v. State of Maharashtra (2015) 64 taxmann.com 396/[2016] 53 GST 293/331 ELT 23 (SC) has held that the sale of Sodexo meal vouchers is not goods in itself; instead, they are merely a medium of facilitation between affiliates and customers.

In another case, the Supreme Court in Idea Mobile Communication Ltd. v. CCE&C [2011] 12 taxmann.com 307/32 STT 262 (SC), concerning the taxability of SIM cards, has held that SIM cards are never sold as goods independent from services provided therein.

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