In the case of Kalyan Jewellers, Honble Madras HC modified a ruling given by the Appellate Authority for Advance Rulings (AAAR), which had been sought earlier by this entity.
The high court clarified that a ‘gift voucher’ is an ‘actionable claim’ (enforceable debt), not constituting a supply of goods or services under Schedule III. It disagreed with the stand taken by AAAR and rejected the notion that the ‘time of supply’ is exclusively the date on which the gift voucher was issued. Instead, it held that the tax liability is determined based on the inherent nature of the transaction.
“The high court’s decision has provided much-needed clarity by holding that gift vouchers are in the nature of ‘actionable claims’. Only if gift vouchers are issued for specified or identified goods ‘and’ for a specified value, GST is payable at the time of issuance. In cases where the goods or services remain unidentified for future purchase, GST is only applicable at the time of sale, i.e. upon redemption.” He illustrates: Say Mr A buys a gift voucher of Rs 1,500 issued by an online portal selling a wide range of goods. He gifts it to his niece on her birthday. The amount is specified, but not the goods. After the birthday celebrations, the niece decides to redeem it against soft toys (a doll). The GST incidence in this case, arises not on issue of the gift voucher, but at the time of redemption and the 12% GST rate that is applicable to soft toys will be levied. Had she opted for a video game console, the GST rate applicable would be 18%. On the other hand, if the voucher was for a specific brand and specific type of toy, the GST would be levied at the time of issue of the voucher.
In the case settled by the high court, Kalyan Jewellers, which was engaged in the manufacture and sale of ornaments through its retail outlets across India, had introduced a scheme of issuing different types of gift cards. These gift cards were sold in its retail outlets and on various online portals.
