A number of shops provide vouchers or present playing cards to prospects that may be redeemed for his or her merchandise. A clarification on the difficulty is predicted shortly, folks conversant in the matter informed ET.
Some vouchers have GST levied on them on the time of buy, which results in double taxation when they’re used to purchase items or providers that additionally embrace the tax. The proposed clarification is predicted to clear the air on the taxability of vouchers and present playing cards, suggesting they shouldn’t be taxed on the level of sale. It is usually prone to spell out taxation of vouchers which can be tradeable or bought to distributors or sellers by corporations.
“It’s being examined,” mentioned a authorities official.
A ultimate name on the clarification can be taken by the GST Council, the official mentioned, including that its legislation committee is trying into the difficulty.
The problem largely pertains to the taxation of multi-purpose or non-identifiable vouchers, which may be redeemed for any items or providers. Providers or the products paid for by these vouchers face tax on the relevant charge. The business maintains that these vouchers ought to be taxed solely on the time of redemption on the relevant GST slab on the products or providers bought and never on the time of their issuance as it might result in twin taxation.Single-purpose or identifiable vouchers may be redeemed for the products they’ve been issued for and, for the reason that items or providers to be bought are identified, face tax on the time of their issuance. Moreover, the levy of tax on your complete face worth as a substitute of simply the fee in case the vouchers are traded, a typical apply adopted by the business, can also be being examined.
Confusion on the taxability of vouchers, that are a preferred promotional device for corporations, adopted a 2021 ruling by the Karnataka Authority for Advance Rulings within the case of Premier Gross sales Promotion Pvt Ltd. This held that vouchers have been items and taxable.
The ruling, upheld by the Appellate Authority for Advance Rulings, was subsequently turned down by the excessive court docket.
Nonetheless, the appellate authority determination prompted authorities in some jurisdictions to impose GST and lift calls for for the interval earlier than the AAR ruling.
Trade Raises Considerations
Trade has sought readability because the levy of tax might imply the tip of this device that operates on low margins. It has flagged issues over the levy of tax at every leg of the distribution of the present playing cards or vouchers, together with distribution or commerce margins and breakage worth of unredeemed vouchers.
An in depth clarification have to be issued by the GST Council to keep away from unwarranted two-way taxation involving fee by way of vouchers, mentioned PwC associate Pratik Jain. This could embrace whether or not and in what case they’d qualify to be “actionable claims,” he mentioned.
“Arguably vouchers are only a mode of fee of consideration. This side has been accepted by courts in some instances as properly,” Jain mentioned.
“The GST Council must make clear that vouchers are actionable claims and buying and selling in vouchers and the margins earned therein doesn’t evoke any GST legal responsibility,” mentioned Bipin Sapra, associate, tax and regulatory providers, oblique tax, EY.
Breakage earnings doesn’t entail a provide and isn’t liable to GST within the present construction of legislation, Sapra added.
