Gift vouchers are actionable claims under GST law, tax liability depends on voucher specificity and redemption timing

Madras HC held that gift vouchers/cards are actionable claims under GST law, qualifying as debt instruments that acknowledge debt and create rights/liabilities. The court ruled that vouchers for unspecified items are not taxable at issuance as they constitute actionable claims under Schedule III exemption. However, vouchers for specified items attract GST at issuance time due to deemed supply provisions. For general vouchers, tax liability arises only upon redemption when actual supply occurs. The court partially quashed the impugned order, clarifying the taxation timeline based on voucher specificity.

---

---

Issues Involved:
1. Classification of Pre-Paid Instruments (PPIs) as supply of goods or services.
2. Determination of the time of supply and applicable tax rate for PPIs.
3. Taxability of PPIs issued by third parties.
4. Treatment of discounts on PPIs.
5. Definition and taxability of "Gift Vouchers" under GST.
6. Whether PPIs are actionable claims and their tax implications.

Issue-wise Summary:

1. Classification of PPIs:
The petitioner sought clarification on whether the issue of own closed PPIs by the applicant to their customers should be treated as supply of goods or services. The Tamil Nadu Advance Ruling Authority (AAR) ruled that the own closed PPIs issued by the applicant are 'vouchers' as defined under CGST/TNGST Act 2017 and are a supply of goods under the respective GST enactments.

2. Time of Supply and Applicable Tax Rate:
The AAR determined that the time of supply for such gift vouchers/gift cards by the applicant to the customers shall be the date of issue if the vouchers are specific to any particular goods. If the gift vouchers/gift cards are redeemable against any goods, the time of supply is the date of redemption. The applicable tax rates were specified based on the classification of the vouchers under the respective tariff headings.

3. Taxability of PPIs Issued by Third Parties:
The AAR did not answer questions related to the taxability of PPIs issued by third parties, stating that the authority does not have jurisdiction over these matters.

4. Treatment of Discounts on PPIs:
The AAR did not address the treatment of discounts (the difference between face value and discounted value) in the hands of the issuer of PPIs, as these questions were not admitted due to lack of jurisdiction.

5. Definition and Taxability of "Gift Vouchers":
The second respondent, Tamil Nadu State Appellate Authority for Advance Ruling (TNSAAAR), modified the AAR's order, concluding that a voucher is neither goods nor services but a means for payment of consideration. The term "Gold Voucher" was corrected to "Gift Voucher." The impugned order held that the gift voucher would be taxable at the time of issuance in view of Section 12(4)(a) of the respective GST enactments.

6. PPIs as Actionable Claims:
The petitioner argued that gift vouchers/gift cards are actionable claims and not liable to tax as they fall within the purview of the exclusion in Section 7(2) of the respective GST enactments read with Schedule III. The court examined various definitions and concluded that the gift vouchers/cards are actionable claims and thus not liable to tax by themselves. However, if the gift vouchers/cards are issued for specified goods, tax is payable at the time of issuance. If issued for unspecified goods, tax is payable at the time of redemption.

Final Judgment:
The court partly allowed the writ petition, modifying the impugned order to clarify that if the gift vouchers/cards are for specified items, tax is payable at the time of issuance. If for unspecified items, tax is payable at the time of redemption. The impugned order was quashed to the extent of this clarification.

---