Clearing the air over the applicability of gift cards or vouchers, the Tamil Nadu bench of the AAAR has ruled that GST would be levied on the underlying goods/services at the time of redemption.

Kalyan Jewellers has approached the Appellate Authority for Advance Ruling (AAAR) against the ruling by the Tamil Nadu state Authority for Advance Ruling (AAR), which had said that GST at 12 per cent or 18 per cent would be levied depending on the pre-paid instruments was paper-based or magnetic strip-based, respectively.

Modifying the verdict, the AAAR clarified that GST will be levied not on the supply of vouchers but on the underlying supply of goods/ services at the time of redemption and the time for payment of GST will be dependent on the GST law.

The AAAR said vouchers are neither goods nor services and the GST law recognises it as an instrument of consideration (non-monetary form) for future supply. “As voucher is only an instrument of consideration and not goods or services, the same is not classifiable separately but only the supply associated with the voucher is classifiable according to the nature of the goods or services supplied in exchange of the voucher earlier issued to the customer,” the AAAR said.