Gift vouchers or cash-back vouchers given to customers or suppliers are treated as goods and would be liable to 18 per cent GST, the Authority for Advance Ruling (AAR) has said.

Bangalore-based Premier Sales Promotion Pvt Ltd approached the AAR’s Karnataka bench on the GST rate that would apply to the supply of gift vouchers, cash-back vouchers or the supply of e-vouchers with multiple options. The applicant is involved in the trading of vouchers in the course of its business.

With respect to gift vouchers, the AAR noted that the applicant purchases the vouchers and sells them to its clients. The clients in turn distribute them to their clients/customers and the customers use them to to pay for goods or services.

The gift vouchers would not obtain the character of money at the time of their supply to the applicant, the AAR ruled.

For cash-back vouchers and multiple options e-vouchers, the AAR observed that the said vouchers cannot be covered under the definition of “money” at the time of supplying them but would take the colour of money only when used for payment of consideration for supply of goods or services procured by the end-user.

Passing the ruling, the AAR said the supply of vouchers are taxable as goods and will attract 18 per cent GST.

Rajat Mohan, senior partner with AMRG, said, “This ruling also rejected the special provisions in GST rules concerning the time of supply-related vouchers. This ruling may lead to complications for corporates using special vouchers that could not be identifiable to a particular product at the time of its issuance,” he said.

Abhishek Jain, tax partner, EY, said: “Most industry players are not treating vouchers per se as goods and are paying GST on ultimate supply against which such vouchers are used. However, this ruling says vouchers are covered under goods. This ruling would create uncertainty in industry and lead to litigation.”

Tax expert Bimal Jain said the Premier Sales ruling seems to be distorting the scheme of GST law and if applied in all cases of vouchers, it will result in double taxation — once at the time of supply of vouchers and again at the time of supply of the underlying “goods’ or “services.”