During its 55th meeting on December 21, 2024, the GST Council clarified that transactions involving vouchers will not be classified as supplies of goods or services, thus exempting them from GST. This decision aims to resolve ongoing disputes regarding the taxation of gift vouchers, following previous confusion stemming from a ruling by the Karnataka Authority for Advance Rulings. The ruling is expected to benefit the retail sector by simplifying compliance and reducing costs associated with voucher usage.
India's GST Council Exempts Vouchers from Taxation
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Author: Ivana Picajkić
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Fiscal subject related
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Content accuracy validation date:
27.12.2024
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10:54h
In a notable decision during its 55th meeting held in Jaisalmer on December 21, 2024, the GST Council has clarified that transactions involving vouchers will not be classified as either a supply of goods or services, thereby exempting them from taxation under the Goods and Services Tax (GST) framework, according to sources from ET Bureau.
This ruling aims to provide essential clarity and resolve ongoing disputes regarding the taxation of gift vouchers. The decision was prompted by requests from the retail sector for clarification after a prior ruling by the Karnataka Authority for Advance Rulings deemed vouchers taxable as goods in the case of Premier Sales Corp. The new ruling offers relief to businesses that commonly utilize vouchers for promotional purposes.
The council's clarification is based on recommendations from its law panel, which indicated that vouchers—recognized as prepaid instruments by the Reserve Bank of India (RBI)—are intended to settle obligations and should not be subject to taxation, as confirmed by officials to ET Bureau. If vouchers are not considered as a means of payment, they would fall under “actionable claims,” which are also exempt from tax.
Additionally, the GST Council discussed various other significant issues, including potential tax reductions on insurance products, an increase in GST rates for used electric vehicles, and adjustments to taxes on luxury items such as watches, pens, and shoes. However, there were significant differences among states on these proposals, leading some to be postponed for further discussion.
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