AAR rules 18% GST on e-voucher traders, on plea by marketing services firm

Rules that e-vouchers are not an actionable claim, and are not exempt from GST. They attract 18% GST as they come under the residual category

The Karnataka-based authority for advance rulings (AAR) has sorted out a tricky issue of levying goods and services tax (GST) on the supply of e-vouchers by sales promotion companies to other companies. It ruled that sales promotion companies that trade in vouchers will have to pay GST at the rate of 18 per cent and mention it on its monthly or quarterly sales returns.

The ruling was given on a petition by a company engaged in the business of providing marketing services. As part of the offered services, the applicant also supplies e-vouchers. It sources e-vouchers for other companies. The purchasers of these vouchers will issue the same to their clients, who will, in turn, encash them for purchase of goods or services.  

The authority ruled that e-vouchers are not an actionable claim--in other words they are not exempt from GST. This is so because the entitlement of redemption is transferred or delivered to the purchaser at the time of supply of vouchers by the applicant to its clients.

Further, e-vouchers are taxable at the rate of 18 per cent GST as these would come under the residual category, the authority ruled.

The AAR also held that since the applicant is not aware of the date of redemption of the vouchers, the time of supply would be the date of filing of periodical sales return which could be quarterly or monthly. Companies till the annual turnover of Rs 1.5 crore are exempt from filing monthly returns.  

"Taxability of vouchers is always a tricky issue as it involves multiple parties, intangible nature of goods, contingency on its use, dispute on whether the same qualifies as ‘consideration’ or ‘money’ etc,” said Harpreet Singh, partner, indirect tax at KPMG in India.

It is pertinent to note that in this case the applicant was involved in trading of vouchers and hence the authority clearly mentioned that the activity amounts to supply,  Singh added

There was also an issue whether e-vouchers are to be classified as goods or services. The AAR placed reliance on the Supreme Court judgement in the case of Tata Consultancy Services Vs State of Andhra Pradesh in 2004 and held that since the voucher is capable of abstraction, consumption & use and it can be transmitted, transferred, delivered, stored, possessed etc, it would get covered under the ambit of goods, though it is intangible.