Pay Highest Tax Of 18% GST On Gift Cards & Cash Back Vouchers! How Will This Impact Your Online Shopping?

Coughers of Governments throughout the country are drying up. They have been burdened with increasing expenses required to curb the pandemic in the situation when there are intermittent and sporadic lockdowns throughout the country. So what do you do as a government? You look for ways that can give you new sources of income. And is there any easier way than levying new taxes? No, right? That’s what the government is seemingly doing now.

Gift and Cashback vouchers now will attract 18% GST

While looking for increasing the scope of taxation, the tax department has now decided to levy GST on the supply of e-vouchers. This move has brought even exclusive marketing companies under the tax net.

In a recent ruling the Authority for Advance Ruling, Karnataka brought supplies of e-vouchers made by marketing firms liable for 18 percent GST. The authority termed these instruments as part of the overall supply of goods and services having an underlying value that is taxable.

Impact of this move

This ruling will impose a tax of 18 percent on all the E-vouchers, whether identifiable or not on the issuance of such vouchers. This will cause accumulation of tax credit for companies using E-vouchers and supplying products like jewelry, Household necessities such as edible oil, sugar, spices, tea, and coffee, processed food, laptops/computers, and Life-saving drugs that are listed for the lower rate of taxes.

Responding to this decision, Rajat Mohan, Senior Partner, AMRG & Associates, said “AAR has held that the supply of e-vouchers is taxable as goods at the rate of 18 percent irrespective of the underlying item procured using such vouchers. This ruling also rejected the special provisions mentioned in GST rules concerning the time of supply related to the vouchers. This may lead to complications for numerous corporates using special vouchers that could not be identifiable to a particular product at the time of its issuance.”