GST Circular No 243/2024
This circular provides clarification on various issues related to the GST treatment of vouchers. Below is a point-wise explanation of the circular in English:
Questions regarding GST on vouchers:
Multiple questions have been raised by trade and industry regarding vouchers, such as whether transactions involving vouchers qualify as the supply of goods and/or services, whether GST is applicable to the trading of vouchers, and whether unredeemed vouchers (breakage) are taxable.
To address these issues, the Central Board of Indirect Taxes and Customs (CBIC) has issued this clarification.
Do transactions in vouchers fall under the category of supply of goods and/or services?
A voucher can be a payment instrument that creates an
obligation on the supplier to accept it as consideration or part consideration for the supply of goods and/or services.
If the voucher is recognized as a prepaid instrument by the Reserve Bank of India (RBI), it will be considered as “”money,”” and the transactions involving such vouchers would not be considered the supply of goods or services.
If the voucher is not recognized as a prepaid instrument by RBI, it could be considered an “”actionable claim”” under the CGST Act, and the transaction would not be treated as a supply of goods or services.
GST treatment of transactions in vouchers by distributors/sub-distributors/agents:
If vouchers are distributed on a “”Principal-to-Principal”” (P2P) basis (where the distributor/sub-distributor purchases vouchers and sells them to end customers), this transaction would not be treated as the supply of goods or services under GST.
If vouchers are distributed on a commission/fee basis (where agents/distributors act on behalf of the voucher issuer), GST would be applicable on the commission/fee or any other amount received by the agents for the service provided.
GST treatment of additional services like advertisement, co-branding, marketing, customization, technology support, customer support, etc.:
If additional services (such as advertisement, co-branding, etc.) are provided by a distributor/sub-distributor or another service provider to the voucher issuer, the service fee or charge would be liable to GST as a supply of services.
GST treatment of unredeemed vouchers (breakage):
When vouchers remain unused or unredeemed after their expiry period (referred to as breakage), there is no supply of goods or services, so no GST would be applicable to such unredeemed vouchers.
As there is no consideration for any supply when vouchers are not redeemed, the amount retained as breakage cannot be treated as taxable consideration under GST.
Final Notes:
This circular clarifies the GST treatment of transactions involving vouchers, ensuring there is no ambiguity in the implementation of the law.
If there are any issues in implementing this circular, they can be brought to the notice of the Board.
It is requested that suitable trade notices be issued to inform the public about the contents of this circular.
This circular aims to clarify the GST position on vouchers to ensure proper compliance and eliminate confusion in the trade and industry.
