This decision is expected to bring much-needed clarity and resolve longstanding disputes surrounding the taxation of gift vouchers.
The decision follows requests from the retail sector for clarity after the Karnataka Authority for Advance Rulings previously ruled that vouchers were taxable as goods in the case of Premier Sales Corp. The new ruling provides relief to companies and retail businesses that frequently use vouchers for promotions.
The council’s clarification stems from recommendations by its law panel, which stated that vouchers—defined as prepaid instruments under the Reserve Bank of India (RBI)—are used as consideration to settle obligations and should not be taxed, as told by officials to ET Bureau.
If vouchers are not treated as consideration, they would fall under the category of “actionable claims,” which are also not taxable.
“The clarification that transactions in vouchers are not liable to GST will put to rest all disputes regarding the nature of vouchers and confirm that vouchers are mere instruments and not supplies in themselves,” Bipin Sapra, Partner at EY, had said.The GST Council also deliberated on other key issues, including tax cuts on insurance products, increasing the GST rate on used electric vehicles, and rationalizing taxes on luxury goods like watches, pens, and shoes. However, there were wide divergences among states, and some proposals were deferred for further discussion.