CBIC Clarification on GST Treatment of Vouchers
The GST treatment of vouchers has raised several questions, leading to confusion and disputes in the trade and industry. Circular No. 243/37/2024-GST dated 31 December 2024 seeks to clarify these issues and provide uniform guidance on the application of Goods and Services Tax (GST) to vouchers. The Circular addresses several key points, including whether transactions involving vouchers are taxable, the GST treatment of voucher trading by distributors or agents, and the treatment of unredeemed vouchers (breakage).
1. GST Treatment of Transactions Involving Vouchers
Under the CGST Act, 2017, a voucher is defined as an instrument that creates an obligation for the supplier to accept it as part or full consideration for goods and/or services. The GST treatment of vouchers depends on whether they are considered a form of money or an actionable claim.
- Vouchers as Money: If a voucher is a pre-paid instrument (PPI) recognized by the Reserve Bank of India (RBI) and used to settle obligations, it will be treated as money. According to the CGST Act, money is excluded from the definition of goods and services, meaning transactions involving such vouchers are not taxable under GST.
- Vouchers as Actionable Claims: If the voucher is not recognized as a pre-paid instrument by the RBI, it will be treated as an actionable claim, defined as a claim to goods or services that are not yet supplied. As per Schedule III of the CGST Act, actionable claims, other than specified claims (such as gambling, betting, etc.), are neither classified as goods nor services. Therefore, transactions involving such vouchers would not attract GST.
In both scenarios, the supply of goods or services in exchange for the voucher may still be subject to GST, depending on the nature of the underlying transaction.
2. GST Treatment of Voucher Transactions by Distributors, Sub-Distributors, and Agents
There are two main models for distributing vouchers:
(i) Principal-to-Principal (P2P) Basis
In this model, distributors purchase vouchers from the issuer at a discounted rate and sell them to sub-distributors or end customers at a higher price, earning a margin. Since the transaction in vouchers is neither a supply of goods nor services, GST is not applicable to the trading of vouchers under this model.
(ii) Principal-Agent Model
If vouchers are distributed through agents, sub-distributors, or distributors acting on a commission or fee basis, they do not own the vouchers and operate as agents. In this case, the commission or fee earned by the agent for distributing the vouchers is subject to GST as a supply of services.
3. GST Treatment of Additional Services Related to Vouchers
Vouchers may come with additional services such as marketing, advertisement, co-branding, technology support, and customer services. If these services are provided by distributors or third-party service providers for a fee, the service fee is subject to GST at the applicable rate.
4. GST Treatment of Unredeemed Vouchers (Breakage)
Unredeemed vouchers, or “breakage,” refer to the value of vouchers that are not redeemed by the customer within the validity period. The key issue here is whether the amount from unredeemed vouchers is subject to GST.
- No Supply of Goods/Services: Since unredeemed vouchers do not involve the supply of goods or services, and there is no consideration paid for the non-redemption, the amount attributed to breakage is not taxable under GST.
- No Consideration for Non-Redemption: As clarified by Circular No. 178/10/2022-GST, there must be an agreement for the supply of goods or services in exchange for consideration for a transaction to be taxable. Since there is no agreement between the voucher issuer and the redeemer for the non-redemption, breakage does not constitute a taxable supply.
Thus, the amount retained for unredeemed vouchers (breakage) is not subject to GST.
Conclusion
The GST treatment of vouchers is governed by their classification as either a pre-paid instrument (money) or an actionable claim. In both cases, the transaction involving the voucher itself is generally not subject to GST, though the underlying supply of goods or services against the voucher may still be taxable. Similarly, transactions by distributors, agents, and sub-distributors, depending on their role, may or may not be subject to GST. Lastly, the amount from unredeemed vouchers (breakage) is not taxable, as it does not represent a supply of goods or services.
By clarifying these aspects, Circular No. 243/37/2024-GST ensures a uniform approach in handling GST on vouchers, reducing ambiguity and the potential for disputes.
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