Gift Vouchers, Cash Back Vouchers, and E-Vouchers are not goods or services, and will not attract GST, Karnataka High Court said. Earlier, Authority for Advance Rulings had ruled these vouchers will be taxable. Later, this ruling was affirmed by Appellate Authority for Advance Ruling (AAAR).

“The printed forms are like currency. The value printed on the form can be transacted only at the time of redemption of the voucher and not at the time of delivery of vouchers to the assessee’s client. Therefore, the issuance of vouchers is similar to pre-deposit and not the supply of goods or services. Hence, vouchers are neither goods nor services and therefore cannot be taxed,” a division bench of Justices P S Dinesh Kumar and T G Shivashankare Gowda said in a recent ruling.

The bench said that these are mere instruments accepted as consideration for the supply of goods or services. They have no inherent value of their own.

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“As vouchers are considered as instruments, they would fall under the definition of ‘money’, defined under CGST Act. The CGST Act excludes ‘money’ from the definition of goods and service and therefore not leviable to tax,” it said.

‘Remain an instrument’

The petitioner, Bengaluru-based Premier Sales Promotion Limited is engaged in the transactions of procuring Pre-paid Payment Instruments of Gift Vouchers, Cash Back Vouchers, and E-Vouchers from the issuers and supplying them to its clients for specified face value. Its clients issue such vouchers to their employees in the form of incentives or to other beneficiaries under promotional schemes for use as consideration for the purchase of goods or services or both.

Earlier, it approached AAR to find taxability of such vouchers which ruled “supply of vouchers is taxable as goods.” Later, AAAR found nothing wrong in the ruling, after which the petitioner moved to the High Court. They argued that RBI’s master direction on the issuance and operation of PPI (prepaid payment instrument) recognises the PPIs for the purchase of goods and services.

The vouchers involved in this case are PPIs that do not disclose the goods and services at the time of issuance. The actual supply of goods or services takes place only when the voucher is presented for redemption by a customer to a supply of goods and services except when the voucher itself identifies the goods or services for the value mentioned in the voucher. The voucher would remain to be an instrument till the time of redemption.

Some definition

After going through the facts presented and hearing all the arguments, the bench noted that the definition of money includes any other instrument recognised by the Reserve Bank of India when used as a consideration apart from Indian legal tender or any foreign currency, cheque, promissory note, bill of exchange, letter of credit, draft, pay order, traveller cheque, money order, postal or electronic remittance.

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According to the bench, vouchers are semi-closed PPIs in which the goods or services to be redeemed are not identified at the time of issuance. These are distributed to its employees or customers and can be redeemed by them. These PPIs do not permit cash withdrawal, irrespective of whether they are issued by banks or non-banking Companies and they can be issued only with the prior approval of the RBI.

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