Summary: The GST Policy Wing issued Circular No. 243/37/2024-GST | Dated: 31st December, 2024, providing clarity on various issues related to the GST treatment of vouchers. According to the circular, transactions in vouchers themselves are not considered as a supply of goods or services; they are merely instruments creating an obligation for the seller to accept them as part of the consideration. However, when vouchers are used to pay for goods or services, GST may apply. The circular outlines two scenarios for voucher distribution: 1) When vouchers are sold through distributors or agents on a Principal-to-Principal basis, no GST is applicable as it is pure trading. 2) When vouchers are distributed through agents on a commission basis, GST is applicable on the commission or fee earned by the agent. Additionally, GST applies to services like marketing, co-branding, and customer support provided to the voucher issuer. Lastly, GST does not apply to the value of unredeemed vouchers (breakage), as no goods or services are supplied in these cases. The circular provides clarity on these common voucher-related issues, ensuring a more consistent GST approach.
Clarification on various issues pertaining to GST on treatment of vouchers –
First of all let me make it clear that –‘’transactions in vouchers cannot be considered as either as supply of goods or as a supply of services as voucher is just an instrument which creates an obligation on part of seller to accept it as a consideration or part consideration.’’
But supply of goods/services for which vouchers are used as consideration may be taxable under GST.
Issue No 1- GST treatment of transactions in vouchers by distributors /sub-distributers /agents etc
Vouchers can be distributed in two ways-
a. Vouchers are distributed through distributors /sub-distributors/agents on Principal to Principal basis-
In such cases, distributor/dealers purchases vouchers from voucher issuer at discounted rate and thereafter sells the same to sub-distributors /end-customers at trading margin ..Then in this case distributor/dealers own the vouchers at the time of sale so pure trading in vouchers in this case would not constitute either as supply of goods or services ,hence no GST is leviable as per Sec 9(1) -CGST ACT 2017
b. Vouchers are distributed using distributors /sub-distributors/agents on commission/fee basis-
Here in such cases -relationship of principal-agency established between voucher -issuer and distributors/agents and distributors /sub distributors do not own the vouchers and they are only agents so GST would be payable by such distributors /agents on commission/fees by whatever name called as supply of services to voucher issuer.
Issue no 2 – GST treatment of additional services such as advertisement, co branding, marketing & promotion, customization services, technology support services, customer support services etc.
Sometimes , additional services such as advertisement, co-branding, customization services, technology support services, customer support services, etc. are provided by either the distributor/ sub-distributor or by another person to the voucher issuer against a service fee/ service charge/ affiliate charge or any other amount, by whatever name called, as per contract/agreement between such service provider and the service recipient (voucher issuer)
So GST would be payable on at the applicable rate on such service charge /affiliate charges.
Issue No 3- GST treatment of unredeemed vouchers (breakage).
Sometimes, vouchers remain unused/ unredeemed at the end of their expiry period.
The value of such unredeemed vouchers accounted for in the statement of income is called breakage.
GST is leviable only on the supply of goods and/or services. In the case of breakage, there is no redemption of voucher and there is no supply of underlying goods and/or services. Therefore, there is no supply of goods and/or services on account of such unredeemed vouchers (breakage). Hence, no GST appears to be payable on such amount attributable to non-redemption of voucher (breakage).
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