[Opinion] GST Implications on Issuance of Vouchers

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CA Sri Harsha – [2023] 148 taxmann.com 175 (Article)

The recent judgment of Karnataka High Court in the matter of Premier Sales Promotion (P.) Ltd. v. Union of India (for brevity ‘Premier Sales’) is an interesting development qua the taxability of the vouchers. The vouchers have occupied a prominent place under the erstwhile indirect taxation regime. There are occasions where the vouchers are tried and failed to be taxed as ‘goods’ for the purposes of state and other similar levies.

Under the GST regime, one can find mention about the ‘vouchers’. The legislature has defined the ‘voucher’ and there exists other provisions namely time of supply and valuation qua vouchers. This is a stark difference when compared with the previous regime. Though appreciable, there is still a lot, to be covered with respect to the taxability of ‘voucher’.

In this article, we shall try to examine certain issues that surround the taxability of ‘voucher’. In order to explore the various issues, we need to first understand what a ‘voucher’ is?

Vouchers and Types

The ‘voucher’ is defined vide section 2(118) of CT Act to mean an instrument where there is an obligation to accept it as consideration or part consideration for supply of goods or services or both and where the goods or services or both 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.

Hence, from the above, it boils down, that we can call an instrument as a ‘voucher’ only if the following two conditions are satisfied; where there is an obligation to accept it as consideration or part consideration for supply and where the goods/services/both to be supplied/identities of potential suppliers are indicated.

The first condition that is acceptance of instrument towards consideration, whether in whole or in part does not present any issue and can be said to be satisfied. The second condition that in order for an instrument to qualify as vouchers, there should be the identification of the goods or services or both to be supplied or identities of potential suppliers are available either on the instrument itself or in related documentation, including the terms and conditions, presents a challenge.

Not all vouchers may have an identity qua the goods or services or the potential suppliers. RBI classifies the pre-paid payment instruments (PPIs) into three categories; closed system PPIs, semi-closed system PPIs and open system PPIs. Let us see, whether which of the above PPIs qualify as ‘voucher’ under the GST laws.

From the above, we understand that there are certain type of PPIs, that is ‘Open System PPIs’ which do not qualify as ‘voucher’ as per the definition available in CT Act. We shall understand the tax implications on issuance of such type of vouchers at appropriate place. Further, since the closed system PPIs are not regulated by RBI, as these instruments cannot be used for payments or settlement for third party services, the implications of this non-regulation by RBI also has a potential of creating taxation issues, which we shall deal at appropriate place.

Now, let us proceed to examine, the tax implications on issuance of semi-closed PPIs, which satisfy the definition of ‘voucher’ under GST laws. In order to understand the tax implications, we need to first agree upon, as to, whether a ‘voucher’ can be called as ‘goods’ or ‘service’? This is important because, under the GST laws, there exists a separate legislative treatment for goods and services.

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