Court Rejected AAAR Stance that ‘Time of Supply’ is Solely Determined by the Date of Issuance of the Gift Voucher
The Madras High Court has recently provided crucial clarity on the applicability of Goods and Services Tax (GST) on gift voucher. This clarification stems from a case involving Kalyan Jewellers, where the High Court modified a ruling by the Appellate Authority for Advance Ruling (AAAR). The court affirmed that a ‘Gift Voucher’ is considered an ‘Actionable Claim’ and does not fall under the category of supply of goods or services as per Schedule-III.
Key Points:
1. Nature of Gift Voucher:
The High Court rejected the AAAR’s stance that the ‘Time of Supply’ is solely determined by the date of issuance of the gift voucher. Instead, it emphasized that the tax liability should be based on the inherent nature of the transaction.
2. Kalyan Jewellers’ Case:
Kalyan Jewellers, a renowned jewellery manufacturer with retail outlets nationwide, introduced various gift cards as part of a promotional scheme. These gift cards were sold both in physical stores and through online portals.
3. GST Application on Vouchers:
According to Prateek Jain, a partner at Price Waterhouse, the GST on vouchers is applicable at the time of redemption. For example, if an individual purchases a voucher worth ₹1,500 online and later gifts it to someone, GST becomes payable only when the voucher is redeemed. The applicable GST rate depends on the nature of the item chosen during redemption.
4. Variable GST Rates:
If the recipient chooses a normal item (e.g., a doll), a GST rate of 12% applies.
Opting for a higher-value item like a video game console incurs an 18% GST rate.
Specialized vouchers for specific brands or types of items attract GST at the time of issuance.
Conclusion:
The Madras High Court’s clarification on the taxation of gift vouchers brings much-needed certainty to businesses and consumers. With the focus shifting from the date of issuance to the inherent nature of the transaction, this ruling sets a precedent for determining GST liabilities in similar cases. Understanding the implications of GST at the time of redemption provides clarity for businesses like Kalyan Jewellers and individuals engaging in gift voucher transactions.
To Access the GSTN Advisory No. 623 CLICK HERE
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