This circular provides detailed clarification regarding the GST implications on transactions involving vouchers, addressing ambiguities faced by trade and industry. It explains that vouchers, whether recognized as prepaid instruments by the Reserve Bank of India or not, merely create an obligation to accept them as consideration for goods or services and are neither a supply of goods nor services under GST. However, GST applies to the supply of the underlying goods or services when vouchers are redeemed.

The circular distinguishes between two models of voucher distribution:

1.      Principal-to-Principal basis – Trading of vouchers in this model is not subject to GST as it is neither a supply of goods nor services.

2.      Commission/Agency basis – When distributed through agents or sub-distributors, GST is payable on the commission or service fee earned.

It further clarifies that any additional services such as advertising, marketing, co-branding, or technology support provided to the voucher issuer are taxable at applicable GST rates. Regarding unredeemed vouchers (“breakage”), since there is no actual supply of goods or services, the amount retained by the issuer is not treated as consideration and hence, not taxable under GST.