Table of Contents
Introduction
Vouchers are extensively used across industries, including retail, e-commerce, hospitality, and telecommunications, for promotional offers, prepayments, and consumer rewards. The taxation of vouchers under Goods and Services Tax (GST) has been a matter of legal and interpretational complexity due to their dual nature—acting both as a mode of payment and as a potential supply of goods or services.
To provide clarity, the CBIC issued Circular No. 243/37/2024-GST on December 31, 2024, categorizing vouchers based on their treatment under GST. Additionally, the Finance Bill 2025 has introduced amendments to resolve ambiguities related to their taxability, particularly concerning the time of supply.
This article provides a detailed and in-depth analysis of GST implications on vouchers, covering:
- Definition & Legal Interpretation
- Classification of Vouchers and Taxability
- Time of Supply and Key Amendments in Budget 2025
- Judicial Precedents and Case Laws
- Practical Scenarios for Businesses
Definition and Legal Framework of Vouchers under GST
Statutory Definition
As per Section 2(118) of the CGST Act, 2017, a “voucher” is defined as:
“An instrument where there is an obligation to accept it as consideration or part consideration for a supply of goods or services, and where the goods or services to be supplied or the identities of their potential suppliers are either indicated on the instrument itself or in related documentation, including the terms and conditions of use of such instrument.”
Key Interpretations
From this definition, we can derive the following critical aspects:
✔ A voucher is a financial instrument that mandates its acceptance as a means of payment for goods/services.
✔ It can be specific to a particular product/service or open-ended for general use.
✔ A voucher itself is not necessarily a good or a service; its classification depends on its nature and usage.
Classification of Vouchers under GST
The CBIC Circular No. 243/37/2024-GST categorizes vouchers based on their treatment under GST law. The classification determines whether GST is applicable and at what stage the tax liability arises.
(A) Vouchers Treated as Prepaid Instruments (PPI) by RBI
✔ If a voucher qualifies as a Prepaid Payment Instrument (PPI) under RBI regulations, it falls under the definition of money under GST.
✔ As per Section 2(75) of CGST Act, “money” is neither goods nor services.
✔ Since GST applies only to the supply of goods or services, no GST is applicable on such vouchers.
🔹 Example: A prepaid mobile recharge card issued by a telecom provider falls under this category.
(B) Vouchers Not Treated as Prepaid Instruments (PPI) by RBI
✔ If a voucher does not qualify as a PPI, it falls under the definition of actionable claims.
✔ Actionable claims are classified as “goods” under GST law.
✔ However, as per Para 6 of Schedule III of CGST Act, actionable claims are outside the scope of “supply.”
✔ No GST is applicable on such vouchers.
🔹 Example: A lottery ticket or betting coupon is an actionable claim and is exempt from GST.
(C) Vouchers under Principal-to-Principal (P2P) Model
✔ If vouchers are traded under a Principal-to-Principal model, they are neither goods nor services.
✔ Trading in such vouchers is not considered a supply, as it either falls under “actionable claims” or “money.”
✔ No GST is applicable.
🔹 Example: A business buying bulk vouchers from a supplier and reselling them at face value.
(D) Vouchers Distributed via Distributors, Sub-Distributors, or Agents
✔ In cases where distributors, agents, or sub-distributors distribute vouchers on commission or service fee basis, GST applies on the commission/service fee received.
✔ The GST rate is determined based on the nature of service provided.
🔹 Example: A third-party distributor sells Netflix subscription vouchers and earns a commission from Netflix. GST applies to the commission.
(E) Additional Services Related to Vouchers
✔ If a distributor provides additional services such as:
- Advertisement & marketing
- Co-branding of vouchers
- Technology support or backend services
✔ GST is applicable on such services at the applicable rate.
🔹 Example: A fintech company offering customized gift card solutions with branding and customer support.
(F) Unredeemed Vouchers (Breakage Cases)
✔ If vouchers remain unredeemed beyond their validity, there is no actual supply of goods or services.
✔ No GST is applicable on breakage income arising from unredeemed vouchers.
🔹 Example: An Amazon gift card that expires without being redeemed.
Time of Supply for Vouchers Under GST
(A) Existing Law Before Finance Bill 2025
As per the CGST Act, 2017:
- For goods (Section 12(4)):
- The time of supply is:
- The date of issue of the voucher if the supply is identifiable at that point.
- The date of redemption of the voucher, in all other cases.
- The time of supply is:
- For services (Section 13(4)):
- The time of supply follows the same rule as for goods.
(B) Finance Bill 2025: Omission of Time of Supply for Vouchers
The Finance Bill 2025 proposes to omit Sections 12(4) and 13(4) to remove ambiguities in voucher taxation.
- This means GST will apply only at the time of actual supply of goods or services, not at the time of issuing vouchers.
- The change eliminates uncertainty in digital and prepaid voucher transactions, making GST compliance easier.
Judicial Precedents on GST Applicability on Vouchers
1. Madras High Court – Tvl. Kalyan Jewellers India Ltd. v. Union of India (2023)
- The court ruled that GST is applicable only at the time of redemption of gift vouchers, as the actual supply of goods or services takes place at that stage.
- The ruling clarified that double taxation would not apply and emphasized that the time of supply should align with the redemption date.
2. Karnataka High Court (2023)
- Held that vouchers are neither goods nor services and hence, are exempt from GST.
- This ruling strengthens the argument that vouchers should not be taxed unless they directly involve the supply of goods/services.
3. Tamil Nadu AAAR (2021) – Gift Vouchers & Taxability
- The time of supply for vouchers should be the date of issue if the supply is identifiable at that time.
- Otherwise, GST should be levied at the time of redemption, at the rate applicable to the goods or services being supplied.
4. Karnataka AAAR (2023) – ITC on Vouchers
- The ruling clarified that since vouchers do not qualify as goods or services, businesses cannot claim Input Tax Credit (ITC) on voucher purchases.
Practical Scenarios of GST Applicability on Vouchers
Scenario | Classification | GST Applicability |
Prepaid Mobile Recharge Voucher | PPI (Money) | No GST |
Amazon Gift Card | Multi-Purpose Voucher | GST at redemption |
Cashback Coupon | Not a supply | No GST |
Netflix Subscription Card | Single-Purpose Voucher | GST at issuance |
Distributor earning commission on vouchers | Service | GST on commission |
Final Takeaways & Call to Action
✔ Classify Vouchers Accurately – Determine whether a voucher qualifies as a prepaid instrument or an actionable claim to assess its GST applicability correctly.
✔ Stay Compliant with Budget 2025 Amendments – Ensure compliance with the latest GST changes, including the omission of time of supply provisions for vouchers.
✔ Report Transactions Correctly – Disclose voucher-related transactions appropriately in GSTR-1 to maintain seamless compliance and avoid penalties.
✔ Seek Expert Guidance – Consult a GST professional to navigate complex classifications, avoid tax disputes, and optimize compliance strategies.
For in-depth GST insights, expert analysis, and compliance updates, follow TaxGroww and stay informed on the latest tax regulations affecting businesses and professionals.