TAXABILITY (SERVICE TAX/ VAT) ON SALE OF GIFT VOUCHERS

[Sudhir Goyal]

Dear Expert,
Kindly assist me on following issue:

Suppose an agent purchases gift vouchers (multipurpose voucher) having value of ₹ 2000 each from Flipkart @ ₹ 1800 and sold the same to company at @ ₹ 1900. Company distribute those gift voucher having value of ₹ 2000 each to its employee on some occasion and The gift voucher gives right to employees to claim them at Flipkart.com for shopping value of ₹ 2000 for any goods/services.

Now my query is,
1.What would be the taxability of tax (service tax/ VAT) on agent hands who earn ₹ 100 margin ?.

2. Further, Agent do not disclose the margin money to customer hence how to invoice the same to customers ?

Thanks in Advances !

[YAGAY and SUN]

Dear Sudhir,

In the case of Sodexo SVC India Private Limited. vs The State of Maharashtra and Others,= 2015 (5) TMI 777 - BOMBAY HIGH COURT Bombay High Court has held that Sodexo meal vouchers are utility goods- Octroi & LBT can be levied on the same. Sodexo has preferred an appeal against the verdict of Bombay High Court in Supreme Court and the Hon‘ble Supreme Court [Civil Appeal Nos. 4385-4386 of 2015, Dated: December 9, 2015] = 2015 (12) TMI 1041 - SUPREME COURT has held that Sodexo Vouchers are not goods and therefore not liable for Octroi or LBT under Section 2(25) of the Maharashtra Municipal Corporation Act, by setting aside the judgment of the Bombay High Court.

Further Mumbai Tribunal long back in the matter of Sodexo, held that on such coupons Service Tax can be levied.

Same principles can be applied in your matter also. Hence, Gift Vouchers may be liable to Service Tax.

Regards,

YAGAY and SUN

(Management, Business and Indirect Tax Consultants)

[Suryanarayana Sathineni]

Whatever is clarified by Yogay & Sun need no intervention.

For more clarity, since the said vouchers are declared as not goods, it is obvious that ST is leviable on them.

Regards

suryanarayana

[deepak gulati]

Hi,

If supreme court held that the same is not goods , then it does not means it is services. The gift vouchers comes under the defination of actionable claim as per defination , as produced below-:

5[“actionable claim” means a claim to any debt, other than a debt secured by mortgage of immoveable property or by hypothecation or pledge of moveable property, or to any beneficial interest in moveable property not in the possession, either actual or constructive, of the claimant, which the Civil Courts recognise as affording grounds for relief, whether such debt or beneficial interest be existent, accruing, conditional or contingent;]

hence as per my opinion no service tax is liable to charge on the same.

[Surender Gupta]

The issue is very interesting - though quite old but is more relevant in GST era.

As per the Draft Model GST Law, actionable claims are specifically included within the meaning of "Goods" and liable to taxed accordingly under GST. Therefore in as long as the Vouchers are being treated as actionable claims, they shall be levied under the GST regime as goods. - See Section 2

AI Summary

Taxability of gift vouchers hinges on their classification as goods, services, or actionable claims under indirect tax law.
Taxability of multipurpose gift vouchers depends on their classification: as goods they attract VAT/sales tax; as services they attract service tax; if treated as actionable claims they may fall outside service tax under pre-GST law. Judicial and tribunal authorities have reached inconsistent conclusions, and the draft GST framework treats actionable claims as goods, suggesting vouchers could be taxed under GST. The agent's resale margin should be treated in accordance with the applicable classification for invoicing and indirect tax compliance.