Reward, cash-back vouchers taxable as items, to be answerable for 18% GST: AAR

The AAR said gift vouchers would not obtain the character of money at the time of their supply to applicant  (Photo: iStock)


Reward vouchers, cash-back vouchers given to prospects or suppliers are handled as items and could be liable to 18% GST, the Authority for Advance Ruling (AAR) has stated.

Bengaluru-based Premier Gross sales Promotion Pvt Ltd approached the AAR’s Karnataka bench on the GST fee that may apply to provide of reward vouchers, cash-back vouchers, or provide of e-vouchers with a number of choices. The applicant is concerned within the buying and selling vouchers within the course or furtherance of enterprise.

With respect to reward vouchers, AAR notes that the applicant purchases the stated vouchers and sells the identical to its purchasers, who in flip distributes them to their purchasers/prospects and the purchasers use them to discharge their obligation to pay consideration for items or companies procured by them from their suppliers. Therefore, the stated reward vouchers wouldn’t get hold of the character of cash on the time of their provide to applicant.

For cash-back vouchers and a number of choices e-vouchers, AAR noticed that the stated vouchers can’t be coated beneath the definition of “cash” on the time of supplying them however would take the color of cash solely when used for cost of consideration for provide of products or companies procured by end-user.

Passing the ruling, the AAR stated the availability of vouchers are taxable as items and can appeal to an 18% items and companies tax.

AMRG & Associates Senior Companion Rajat Mohan stated AAR has held that the availability of e-vouchers is taxable as items at 18%, regardless of the underlying merchandise procured utilizing such vouchers. This ruling additionally rejected the particular provisions talked about in GST guidelines in regards to the time of supply-related vouchers.

“This ruling will impose a tax of 18% on all e-vouchers, whether or not identifiable or not on the issuance of such vouchers.

“It will result in accumulation of tax credit score for corporations utilizing e-vouchers and supplying merchandise like jewelry, family requirements similar to edible oil, sugar, spices, tea, and occasional, processed meals, laptops/ computer systems, and life-saving medication which can be listed for the decrease fee of taxes,” Mohan added.

EY Tax Companion Abhishek Jain stated most business gamers aren’t treating vouchers per se as items and are paying GST foundation final provide towards which such vouchers are used.

“Nevertheless, this ruling says vouchers are coated beneath items and taxing the availability of vouchers at 18% GST (residuary entry). This ruling would create uncertainty within the business and result in litigation.

“The federal government ought to provide you with complete pointers relating to the taxability of vouchers for constant practices and avoiding litigation,” Jain added.

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