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Meaning of vouchers:
the meaning of voucher cannot be determined by merely relying upon the definition of voucher given in Sec 2(118). The actual meaning can be reached after the critical analysis of conjoint reading of definition of ‘voucher’, taxability of advance money received, definition of goods/service which excludes money (and money includes any other instrument recognized by RBI i.e., PPI), and value of supply which excludes only invoice-linked post supply discount but includes non-government price-linked subsidies but does not include consideration received from third party.
One must maintain a difference between the price-linked subsidies and the receipt of consideration from third party. In price-linked subsidy, product is sold at lower price and the differential price is paid by third party, in later case instead, product is sold at normal price, but the payment is made by third person.
in view of the author, if an instrument fulfills the following characteristics, it shall be treated as voucher –
1. at least three parties are involved i.e., –
i. issuer – who issues the instrument to the beneficiary i.e., who will pay the consideration to the supplier on behalf of recipient to the extent of instrument’s value.
ii. beneficiary – who will actually buy the goods/service by adjusting the value of such instrument.
iii. Redeemer/supplier/obligor – who will supply the goods/services to the recipient by accepting the instrument as consideration as an obligation.
2. it carries an obligation (i.e., to be fulfilled in future) in hands of supplier to accept it as consideration only against supply of goods or service or both, i.e., cannot be converted into cash.
Note: Following are not to be treated as voucher –
- instruments which are money (e.g., legal tender); or
- instruments which are equivalent to money (e.g., PPI i.e., Prepaid payment instruments approved under payment and settlement systems, Act, 2017)
- instruments which are convertible into money (e.g., money lying in Paytm wallet); or
- instruments which represents money received in advance (e.g., movie ticket); or
- instruments which represents future discounts as a result of past transaction (e.g., discount coupon or gift coupon issued by Domino’s to it’s customers) – This is equivalent to advance money received.
- Instruments which represents expenditure-based rewards point (e.g., credit card reward points) – this is future discount.
So, any instrument issued by the supplier to the recipient cannot be treated as voucher i.e., supplier and issuer must be different.
Vouchers can be of three types:
- Vouchers redeemable against goods
- Vouchers redeemable against services
- Vouchers redeemable against money/securities
Logic behind taxability of vouchers:
Author’s view is, the reason behind separate taxability of voucher can be the definition of consideration which includes the payment received from third party. (author has no authentic view of Government regarding this)
while value of supply u/s 15 includes non-government price-linked subsidies but does not include the receipt of payment from third party.
So, specific provision for taxability of voucher has been inserted under the GST Law by sec 12 and 13 of CGST Act, 2017.
Examples of voucher:
- Gift coupon of Rs. 150 issued by paypal.in to purchase movie ticket from bookmyshow.com mobile app by using paypal.in as the payment processing system where the coupon will be redeemed by bookmyshow.com.
- to encourage the loyal customers, two free movie ticket coupons issued by woodland to it’s customers where such coupon shall be redeemed by the cinema hall
- Cash-back promo codes
Before we come to the time of supply of voucher, it is to be understood that the voucher would be redeemed against the goods or services or both. Further, the tax liability (i.e., tax rate) may or may not be known at the time of issue of voucher. The time of supply provisions have been drafted by adopting these instances principally.
let’s come to the time of supply provisions related to the vouchers –
Case-1: where supply is identifiable at the time of issue of voucher
Time of supply shall be –
- date of issue of voucher
Case-2: where supply is not identifiable at the time of issue of voucher
Time of supply shall be –
- date of redemption of voucher
So, the law has very clear-cut intent that where the tax liability is known at the time of issue of voucher, pay the tax at that time itself – no need to wait for actual supply.
In other words, it can be interpreted that the law is also very much clear in it’s intention to collect the tax on voucher itself and not on goods or services which shall finally be supplied against the redemption of the voucher.
Cause of concern – Voucher vs. actionable claims – a conflict in case of goods
Let’s take 2 examples
- Gift coupon of worth Rs. 100 issued by flipkart.com for purchasing anything from flipkart.com where the coupon will be redeemed by the supplier registered on flipkart.com.
- to encourage the loyal customers, free gift coupon of Rs. 1000 issued by the shopper’s stop to it’s customers where such gift coupon can be redeemed on any of stores of “Archies” against any “goggle”.
In both the above example the instruments are redeemable against goods.
Now, it is important to mention here that actionable claims other than lottery, betting and gambling are neither goods nor service (Schedule-III)
What is the meaning of actionable claim?
Meaning of actionable claims has to be understood by conjoint reading of definition given in sec 2(1) of CGST Act r.w. Sec 3 of Transfer of property Act, 1882 and the various interpretations given by the Hon’ble Supreme Court in the following cases –
- Anraj Etc vs Government Of Tamilnadu Etc (on 4 October, 1985)
- Vikas Sales Corporation And Anr. … vs Commissioner of Commercial Taxes … (on 1 May, 1996)
- Sunrise Associates vs Govt. Of NCT Of Delhi & Ors (on 28 April, 2006)
- M/S.Yasha Overseas vs Commissioner of Sales Tax & Ors on (6 May, 2008)
- Sodexo Svc India Pvt. Ltd vs State of Maharashtra And Ors (on 9 December, 2015)
To the best of the author’s knowledge and belief, the following principle can be drawn on the basis of the above definition and judgements:
Actionable claim is a right (unsecured debt or beneficial interest in movable property). A thin line to differentiate actionable claim and goods is the separate value different from underlying asset (i.e., movable property) and a ready Market for free transferability. If a right has the above two characteristics then it would become goods, if not, then it’s an actionable claim. however, if the right is related to availing the service, then it is neither goods nor actionable claim but to be categorized as service as the service does not constitute any beneficial interest in movable property.
So, now we shall come back on our examples. In the said example the instruments represent the ‘right’ and that ‘right’ in author’s opinion have no separate value different from underlying asset and hence to be classified as “actionable claim”.
Since such instruments are actionable claims other than lottery, betting and gambling, so in author’s opinion can be treated neither as “goods’ nor as “service”.
On the basis of above discussions following conclusion can be drawn:
- Instruments which are in itself money or are convertible into money or PPI(s) are not vouchers.
- Instruments which represents advance money or future discount are not vouchers.
- Instruments which are redeemable against service(s) shall have to be classified as vouchers -service e.g., telecom vouchers, Pizza coupons issued by third party other than Pizza vendor.
- Instruments which are redeemable against goods may not be classified as vouchers as there can be a possibility of these being treated as “actionable claims” – So, clarification form the Government is necessary regarding what else can be treated as “voucher-goods”.
Author Bio
What is treatment of unclaimed gift voucher
Which were earlier sold by Trader for money but some of voucher were never claimed.
Gift voucher which were claimed , we have paid gst.(@rate which applicable to product).
Now what will be rate for Gift voucher unclaimed.?
Is it taxable or not.?