Time of supply for Gift Vouchers and Gift Cards being Actionable Claims, is the Date of Redemption u/s 12(4)(b) of CGST Act

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In a very important decision the Honourable Madras High Court in the case of  Kalyan Jewellers held that GST is applicable on Gift Vouchers and Cards as they fall under the category Actionable Claims.


A Single Bench of the Madras High Court has held that gift vouchers and gift cards are actionable claims and Goods and Services Tax ( GST ) is applicable on the date of redemption under Section 12(4)(b) of the Central Goods and Services Tax ( CGST ) Act. 

A Writ Petition was filed under Article 226 of Constitution of India, for finding that the time of supply of the gift voucher/ PPIs issued by the petitioner to its customers. 

As a part of the sales promotion, the petitioner formulated a Scheme by issuing different types of Pre-Paid Instruments and/or/Gift Vouchers. 

These ,“Gift Vouchers” are sold both in its retail outlets as well as through online portals by engaging the services of third party service providers. 

In the same issue, the Authority for  Advance Ruling  Tamilnadu by Kalyan Jewellers, held that 

1. The Own closed PPIs issued by the Applicant are ‘vouchers’ as defined under CGST/TNGST Act 2017 and are a supply of goods.

2. The time of supply of such gift vouchers / gift cards by the applicant to the customers shall be the date of issue of vouchers if the vouchers are specific to any particular goods specified against the voucher.

3. If the gift vouchers / gift cards are redeemable against any goods bought at a later date, the time of supply is the date of redemption of voucher.

Aggrieved by the aforesaid order, the petitioner filed an appeal at the Appellate Authority for Advance Rulings ( AAAR ) which also concurred with AAR.

A writ was filed with a single member bench of  Honourable Madras HC

 The bench went on to draw-up an illustration–

For instance, a person may buy a voucher or a coupon as a “gift” of a specified goods of a specific value for being gifted to a donee. The donee, is merely required to collect the merchandise from the store by presenting the “Gift Voucher/Card” and then complete the sale by taking delivery of the goods. It will be a situation covered by Section 12(4)(a) of the respective GST Enactments. 

Similarly if the goods are identified at the time of the issuance of the “Gift Voucher/Card”, GST is payable although full payment is not made and payments are made in installments and delivery is taken later.

Here, the generation of invoice and delivery of the identified goods or merchandise or article is merely postponed to a future date i.e. on the date of production/presentation of “Gift Card/ Gift Voucher”. Therefore, unless there a clear identity of the “goods” or “service” and its value is ascertained on the date of issuance of the “gift voucher” question of taxing a future supply of an unspecified goods or service which is to take place on a future date is not contemplated under the Scheme of the respective GST Enactments. 

This is the true purport of Section 12(4) of the respective GST Enactments. 

Well.......

Therefore it can now be understood that 

if the “Gift Vouchers/Cards” is for a specified item of specified value, tax is payable at the time of its issuance, as there is supply ( i.e transfer) within in the meaning of Section 7(1-A) of the respective GST Enactments read with Sl.No.1(c) to the II Schedule to the respective GST Enactments. 

On the other hand, 

if there is no supply ie. no transfer within in the meaning of Section 7(1-A) of the respective GST Enactments read with Sl.No.1( c) to the II Schedule to the respective GST Enactments, time of supply will get postponed to the actual time of redemption of the “voucher” to a future date of sale of merchandise or such goods when such Gift Voucher/Card is presented by the customer

So the bottom line No Supply comes free any time ! 😀


R.SRIVATSAN,

NACIN, Chennai

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