Gift voucher taxable only at the time of redemption thereof for merchandise where identity of articles not known at the time of issue

Gift voucher taxable only at the time of redemption thereof for merchandise unless the goods or services in question are identified at the time of issue of vouchers

Editor:

The Single Member Bench of the Madras High Court in Tvl. Kalyan Jewellers India Ltd Vs Union of India & Ors. (W.P 5130 of 2022 & W.M.P 5227 & 5228 of 2022 pronounced on 27.11.2023) has reaffirmed the view that gift vouchers are taxable only at the time of redemption of the same for merchandise. This is unless the voucher makes a specific mention of the item for which it can be exchanged in which case, taxability will be at the time of issue of the voucher. Where the voucher is issued and does not specify the goods to be obtained but can be exchanged for anything dealt with by the dealer/trader, the taxability would be on the goods transferred at the time of redemption of the voucher. Both, the identity of “goods” or “service” to be received as well as value thereof have to be ascertained at the time of issue of voucher for taxability to arise at the time of issuance of voucher.

The Court has held that gift vouchers satisfy the definition of “actionable claims” within the meaning of Section 3 of Transfer of Property Act 1882 and as such not liable to tax by themselves. What is taxable is the underlying transaction/transfer of goods or services involved.