Mazars Tax Alert | Edition 02.21

Taxability of E-Vouchers - Dispute Continues

Taxability of E-vouchers has now became a prominent transaction for debate. Recently, Authority of Advance Ruling (AAR), Karnataka held that E-vouchers are to be considered as goods & shall be liable to GST. This would lead to implications across industries.
Brief understanding of the ruling is given below:

Facts of the Case:
The applicant is involved the business of marketing and provides various types of E-vouchers to his clients on the basis of orders received. He acts as an intermediary for buying & supplying of E-vouchers of various types such gift vouchers, cashback vouchers, multiple option vouchers.
 
Applicant’s contention:
These vouchers are in the nature of prepaid Payment Instruments (PPI) and issuance of these PPIs is merely a transaction in money. Furthermore, these PPIs are in the nature of debts and should be treated as actionable claim which neither be treated as supply of goods nor as supply of service as per schedule III of CGST/SGST Act.
 
Observations/Findings of AAR:
AAR observed that though the vouchers provided by the applicant are intangible in nature but have all the capabilities to get covered under goods. These are just like “Import license” which are treated as goods although are intangible in nature. For this AAR placed reliance on the judgement of Supreme Court in case of Tata Consultancy Services vs State of Andhra Pradesh.
AAR has also observed that the applicant is merely trading the gift vouchers and also negotiating the price of these gift vouchers. Moreover, providing these E-vouchers cannot not be treated as “Transaction in Money” or “Actionable Claim” as contended by applicant as neither these vouchers are used by clients of applicant to settle the obligation and nor these are covered under the definition of actionable claim as they are not debt and having an expiry period. It is the ultimate End User i.e. clients of client who are using these instruments to settle their claim.
 
Decision of AAR:
Providing these vouchers shall be covered under the term “Supply” and shall be liable to GST @18% under residual entry. AAR also clarified that the value of supply of these vouchers shall be the face value. With regard to time of supply of these vouchers AAR confirmed that the date on which periodical return has to be filed shall be treated as time of supply, as the actual redemption date cannot be determined by the applicant as such vouchers are to be redeemed by end consumer only.