Categorization of Gift Cards:
Whether Gift Card is a good?
“Goods” means every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply.
Lately, Hon’ble Supreme Court in Sodexo Vs. Maharashtra = 2015 (12) TMI 1041 – SUPREME COURT,held that pre-paid instruments like Gift Cards can’t be regarded as goods.
Whether It is a service?
Non-categorization of Gift Card as goods will not automatically mean that it is a service. “Services” means anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged.
Whether it is a voucher?
“voucher” means an instrument where there is an obligation to accept it as consideration or part consideration for a supply of goods or services or both and where the goods or services or both to be supplied or the identities of their potential suppliers are either indicated on the instrument itself or in related documentation, including the terms and conditions of use of such instrument.
Therefore the PPIs under consideration squarely falls under the definition of ‘Voucher’ as defined in section 2(118) of CGST Act.
Vouchers entitles customers to buy goods or services or avail discount from the respective issuer at the time of redemption. Hence, supply of voucher qualifies as “supply” under Section 7 of the CGST Act, specifically as supply of goods.
Hence ruled GST is certainly leviable on issuance of such Gift Cards by issuer.
Rate of GST on vouchers
If the gift voucher is for a ‘specified supply’ product or service that includes GST, the purchase is GST-reportable and payable in the period in which the voucher is sold.
If the gift voucher is not for a ‘specified supply’ product or service, your reporting and payment of GST for the sale of gift vouchers should take place when the voucher is redeemed by the customer.
In nutshell, The rate of tax will be that applicable to goods or services they are issued in respect of or that applicable at the time of redemption.
Value of supply
In case of supply of a voucher, the value will be the redemption value of the voucher.
If voucher expires before redemption?
If the voucher expires before it’s redeemed, you’ll need to report the unredeemed amount as income and 1/11th or 18% to be specific (being the GST component) is reported and paid to the ATO.
But the question arises whether it shall be leviable on trading of Gift Cards by applicant.
In case of Hon’ble Supreme Court in Sodexo Vs. Maharashtra = 2015 (12) TMI 1041 – SUPREME COURT, Apex Court has also said that these coupons/payment instruments become taxable when they are redeemed to purchase goods or services only and not before that.
It also means that any transaction/purchase/sale/trading of these Payments instruments/vouchers/e-charges/e-cash cards etc. between different hands/firms/agencies shall not invite any indirect taxes.
Thus, based on interpretation derived from above case law, your organization being just involved in transaction/ purchase/ sale/ trading of Gift Cards will not be required to charge GST on sale of Gift Cards to the ultimate customers.
You can further read about GST Implications in case of GTA Services: Visit Goods Transport Agency- GST Implications
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