The Central Board of Indirect Taxes and Customs (CBIC) has issued Circular No. 243/37/2024-GST Dt.31.12.2024 to address various issues related to the GST treatment of vouchers. This circular aims to provide clarity on whether transactions involving vouchers are considered a supply of goods or services, the GST implications for trading vouchers, the treatment of additional services, and the handling of unredeemed vouchers.
Key Issues Addressed
- Transactions in Vouchers: Goods or Services?
- Vouchers can be considered as payment instruments that create an obligation on the supplier to accept them as consideration for goods or services.
- If a voucher is recognized as a pre-paid instrument by the Reserve Bank of India (RBI), it is treated as “money” and is neither a supply of goods nor services.
- If a voucher is not recognized as a pre-paid instrument by the RBI, it is treated as an “actionable claim” and is also neither a supply of goods nor services.
Example 1: Pre-Paid Instrument
A retail store issues gift cards that can be used to purchase items in the store. These gift cards are recognized as pre-paid instruments by the RBI.
- GST Implication: Since the gift cards are considered “money,” their issuance and trading are not subject to GST. However, the goods purchased using these gift cards are subject to GST at the applicable rate for those goods.
Example 2: Non-Pre-Paid Instrument
A company issues discount vouchers that can be redeemed for a specific service, such as a spa treatment. These vouchers are not recognized as pre-paid instruments by the RBI.
- GST Implication: The vouchers are treated as “actionable claims” and are not subject to GST. However, the spa treatment provided in exchange for the vouchers is subject to GST at the applicable rate for spa services.
- GST Treatment for Distributors and Agents:
- Principal-to-Principal (P2P) Basis: When vouchers are distributed on a P2P basis, the trading of vouchers is not considered a supply of goods or services and is not subject to GST.
- Commission/Fee Basis: When vouchers are distributed on a commission or fee basis, the commission or fee earned by the distributor or agent is considered a supply of services and is subject to GST.
Example 3: Principal-to-Principal Distribution
A company, XYZ Ltd., issues vouchers worth ₹1,000 each. These vouchers are sold to a distributor, ABC Distributors, at a discounted rate of ₹900 per voucher. ABC Distributors then sells these vouchers to end customers at the face value of ₹1,000, earning a margin of ₹100 per voucher.
- GST Implication: The trading of vouchers by ABC Distributors is not considered a supply of goods or services. Therefore, no GST is applicable on the margin earned by ABC Distributors.
Example 4: Commission-Based Distribution
XYZ Ltd. issues vouchers and engages DEF Agents to distribute these vouchers. DEF Agents do not purchase the vouchers but earn a commission of ₹50 for each voucher sold.
- GST Implication: The commission earned by DEF Agents is considered a supply of services. Therefore, DEF Agents must charge GST on the commission received from XYZ Ltd. The applicable GST rate for services is generally 18%.
- Additional Services:
- Services such as advertisement, co-branding, marketing, and technology support provided by distributors or other entities to the voucher issuer are subject to GST at the applicable rate.
Example 5: Advertisement Services
A distributor, GHI Marketing, provides advertisement services to a voucher issuer, promoting the vouchers through various channels. GHI Marketing charges a service fee for these advertisement services.
- GST Implication: The service fee charged by GHI Marketing for advertisement services is subject to GST at the applicable rate, which is generally 18%.
Example 6: Technology Support Services
A tech company, JKL Solutions, provides technology support services to a voucher issuer, including the development and maintenance of an online platform for voucher distribution. JKL Solutions charges a service fee for these services.
- GST Implication: The service fee charged by JKL Solutions for technology support services is subject to GST at the applicable rate, which is generally 18%.
- Unredeemed Vouchers (Breakage):
- Unredeemed vouchers, or breakage, are not considered a supply of goods or services and are not subject to GST.
Example 7: Unredeemed Gift Cards
A retail store issues gift cards with a one-year validity period. At the end of the year, some gift cards remain unredeemed. The store accounts for the value of these unredeemed gift cards as breakage in its income statement.
- GST Implication: The value of the unredeemed gift cards (breakage) is not considered a supply of goods or services and is not subject to GST.
Example 8: Unredeemed Discount Vouchers
A spa issues discount vouchers for treatments, valid for six months. Some vouchers remain unredeemed at the end of the validity period. The spa accounts for the value of these unredeemed vouchers as breakage in its income statement.
- GST Implication: The value of the unredeemed discount vouchers (breakage) is not considered a supply of goods or services and is not subject to GST.
Conclusion
This circular provides much-needed clarity on the GST treatment of vouchers, ensuring uniformity in the implementation of GST provisions across various field formations. Businesses dealing with vouchers should carefully review these guidelines to ensure compliance and avoid potential litigations.
For further details, refer to the full text of Circular No. 243/37/2024-GST issued by the CBIC.
Calculating GST on vouchers involves understanding the nature of the voucher and the underlying supply of goods or services. Here’s a step-by-step guide to help you calculate GST on vouchers:
Step-by-Step Guide to Calculating GST on Vouchers
- Identify the Type of Voucher:
- Pre-Paid Instrument (PPI): If the voucher is recognized as a pre-paid instrument by the Reserve Bank of India (RBI), it is treated as “money” and is not subject to GST.
- Non-Pre-Paid Instrument: If the voucher is not recognized as a pre-paid instrument by the RBI, it is treated as an “actionable claim” and is also not subject to GST.
- Determine the Underlying Supply:
- GST is applicable on the supply of goods or services for which the voucher is redeemed. The rate of GST depends on the nature of the goods or services provided.
- Calculate the GST on the Underlying Supply:
- Goods: Identify the applicable GST rate for the goods being purchased with the voucher. Common GST rates for goods are 5%, 12%, 18%, and 28%.
- Services: Identify the applicable GST rate for the services being availed with the voucher. The standard GST rate for most services is 18%.
- Apply the GST Rate:
- Calculate the GST based on the value of the goods or services being purchased or availed using the voucher.
Examples
Example 1: Voucher for Goods
A customer uses a voucher worth ₹1,000 to purchase a product with an 18% GST rate.
- Value of Goods: ₹1,000
- GST Rate: 18%
- GST Amount: ₹1,000 * 18% = ₹180
- Total Amount Payable: ₹1,000 + ₹180 = ₹1,180
Example 2: Voucher for Services
A customer uses a voucher worth ₹2,000 to avail a spa service with an 18% GST rate.
- Value of Services: ₹2,000
- GST Rate: 18%
- GST Amount: ₹2,000 * 18% = ₹360
- Total Amount Payable: ₹2,000 + ₹360 = ₹2,360
Important Points to Remember
- GST on Commission/Fee: If the voucher is distributed on a commission or fee basis, the commission or fee earned by the distributor or agent is subject to GST at the applicable rate (generally 18%).
- Unredeemed Vouchers (Breakage): Unredeemed vouchers are not considered a supply of goods or services and are not subject to GST.
By following these steps, you can accurately calculate the GST applicable on vouchers based on the underlying supply of goods or services. If you have any specific scenarios or further questions, feel free to write in comments.
