This wrangle affinity has many divergence/contretemps which affects its exigibility

In today’s business world, the major strategies for alluring more & more customers/clients are more or less based on the idea of giving “Best Deal”. For any business entity, this artillery works best for achieving top-line growth and retaining maximum customers/clients.

The term, ‘discount/voucher’ or ‘free/complimentary stuff’ always has the magic effect; not just for end users/consumers, but it also motivates the client (like; merchant, seller, vendor, tradesman, shopkeeper or broker, etc.) to stay connected with the same business entity. Due to its significant effect on business growth, not a single stream is left from the trump card of ‘discount/voucher’ varies with different names and implications. Though the agenda of these kinds of discounts and vouchers are the same, however, its taxability differs depending upon their terms & conditions which often creates huge litigation.

Understanding the gravity of incertitude evolving in several industries; this article is going to discuss the tax implication of ‘discounts, voucher, coupons and similar kinds of benefit schemes’ under the statutory provisions of Central Goods & Service Tax Act, 2017 (CGST Act). Starting with the introduction, brief glimpses of pre-GST era will be given as background to the article, outlining severity of the present topic. Further, addressing major discount instruments based promotional schemes; this article is going to discuss the different scenarios where this kind of scheme works for sale promotion. After this, a brief of all the discount patterns shall be entailed with the perspective to differentiate each of them from the other. Then citing some landmark/recent judgments, this article attempts to clear down all the disparities affecting the business environment. Lastly, narrow downing all the narrated discussion with a closing statement expediting the overall understanding of the present discussion.


Going with the trend, different business entities come up with various Pre-Paid Instruments (PPIs) as promotional schemes in the market using catchy names to attract maximum clients/ customers for target hitting or stock clearance. Not just that, going one step ahead, many of the competitors have also introduced pre-payment discounts also which clear the outstanding liabilities in less than the normal time duration.

As these kinds of schemes/plans affect the pricing/consideration directly so, its repercussion on the taxability is always a matter of discussion. While analyzing the GST exigibility, the readers should understand all types of schemes introduced with the tag of discount coupons, prepaid vouchers and gift cards, free/complementary stuff etc.; with its factual positions as these terms can be used interchangeably in common parlance. However, GST implications are different irrespective of its names; considering the terms inculcated with the specific promotional scheme.


The taxability of the impugned subject matters was always in dispute, even in the pre-GST era. This fact can be substantiated by turning back to previous litigations; where its saleability as ‘good’ or ‘service’ was in dispute. This issue was settled by the landmark judgment pronounced by the Hon’ble Supreme Court of India in the case of Sodexo SVC India Pvt. Ltd. versus State of Maharashtra [Civil Appeal No. 4385-4386 of 2015 & 2016 (331) ELT 23(SC)] wherein it was declared that taxability of the vouchers/coupons etc. is determinable in terms of the intrinsic/inherent nature of any transaction for which the issuer is getting earned. Accordingly, the apex court has decided the case in favour of assessee and “set aside the judgment of the High Court by holding that Sodexo Meal Vouchers are not ‘goods’ within the meaning of Section 2(25) of the Act and, therefore, not liable for either Octroi/Local Body Tax (LBT).” In a similar way, Idea Mobile Communication Ltd. versus UOI [2011 (23) S.T.R. 433 (SC) & C.A. No.-006319-006319/2011] the Hon’ble SC has held that ‘dominant position of the transaction is to provide services and not to sell the material i.e., SIM Cards which on its own but without the service would hardly have any value at all.

With the above decisions, it becomes a settled position that nature of the transaction is the determining factor for deciding the taxability of the same either as a good or service. However, in post-GST regime, there is much more to analyse for corroborating the taxability of different PPIs in terms of the time of supply of a good/service as enumerated in section 12/13 of CGST Act and eligibility/conditions of Input Tax Credit (ITC) stipulated in section 16 to 21 ibid. Thus, focal point of this present article is to frame these indistinguishable terminologies in reader friendly manner on the basis of their GST taxability.

Discount/Voucher/Coupons & Gift Cards: Types and Patterns

Nowadays, the market is full of different kinds of promotional schemes using pleasing terms everyone is running for giving, best discount for expanding their business to the utmost level. These business promotional ideas can be divided into the following major categories: –

  • Discount – It may interest the readers to note that whole tax regime of India doesn’t define the word ‘discount’ anywhere in the statutes (including GST laws). Sticking to the literal meaning of this term, the simplest way to define ‘discount’ is “reduction in the selling price of any product or service” and it works between two parties i.e. buyer & seller. Considering the broad scope of this term, discount patterns can be divided into different manner: –
  1. General/Occasional & Performance Based: Signifying from its name, first discount schemes are usually awarded in the festive season or any period specifying stock clearance. The second pattern of discounts shall be available to the loyal/prompt clients in terms of their performance in biding the provided targets of sale;
  2. At the Time of Supply & Post Supply Based: One discount given at the time of supply of goods/services reflecting on the actual invoice. Another discount is provided as per the terms of an agreement specifying the supply along with the reference of the invoice whereby, ITC shall be duly reversed by the recipient.
  • Trade Discount and Cash Discount: There is no such bifurcation given in GST laws, but in general parlance; these two discounts are to the buyers with different objectives. The trade discount is often called as an incentive, offered on the product/service price after achieving bulk target sales. On the other hand, cash discount is given by the seller to ensure prompt payment of consideration decided against the supply of particular goods/services. The main criteria differentiating between these two are its moment of applicability first is applied at the time of purchase and the other is allowed at the time of payment.

In simple language, while examining the taxability of any discount two major criteria are required to be followed; one is to check the claimed discount was given with the clear intent of the parties corroborating the same in terms of the executed contract/agreement. Another requirement is the linkage of the claimed discount with the relevant invoice.

  • Voucher – The Central Goods and Service Tax (CGST) Act, 2017 defines this term, under section 2 (118) of the CGST Act whereby, it called as an “instrument where there is an obligation to accept it as consideration or part consideration for a supply of goods or services or both and where the goods or services or both to be supplied or identities of their potential suppliers are either indicated on the instrument itself or in related documentation, including the terms and conditions of use of such instrument.” It is relevant to note that for the readers that Indian GST law does not identify different types of vouchers in terms of their characteristics but the European Union (EU) Council Voucher Directive [Council Directive 2016/1065 dated 27 June 2016] has bifurcated this kind of PPIs into the following categories: –
  1. Single Purpose Voucher (SPV): Exclusive one-time usable electronic/physical format document, where the location of supply to which the voucher relates are known at the time of issuance.
  2. Multiple Purpose Voucher (MPV): Contrary to the above, MPV means where the place of supply to which the voucher relates are not known at the time of issuance. 
  • Coupons & Gift Cards – Again, GST statute does not define coupons or gift cards; so, in a general sense ‘coupons’ & ‘gift cards’ can be considered a document/device like other vouchers which can be redeemed for purchasing a good/service but do not includes barter units. Specifically, about gift cards, it cannot be claimed as a matter of rights as a gift is given without any consideration in return. Recently, Central Board of Direct Taxes (CBDT) issued a Notification No. 74/2022 dated 30 June 2022 wherein it was notified that gift cards, vouchers discounts are excluded to the Virtual Digital Assets (VDA) as defined under the statutory provisions of Income Tax Act, 1961.
  • Free Samples or Complimentary Stuff – Similarly, GST regime has not defined the concerned terminologies though its taxability is analysed in terms of schedules specified under section 7 of CGST Act.

Similitude versus Dissimilarities

After going through the above terms, let’s discuss the nature of these kinds of instruments together focusing on its taxability in the following table: –





Time of Supply (Section 12/13 of CGST Act)  




[Trade Discount


Cash Discount]

Trade Discounts:  Given against biting the specific sales target  

At the time of purchase of stock

Not taxable as same given discount is adjusted at the time of sale/purchase

[sec. 15(3)(a) of CGST Act]


Cash Discounts: Provided against the early release of payment


At the time of payment release within a stipulated time period

Not taxable if it’s given in terms of prior agreement and said cash discount is linked to the relevant invoice/document

[sec. 15(3)(b) of CGST Act]










SPV: One Time Voucher


SPV’s each transaction is treated as supply

No tax leviable at the time of redemption as Tax Treatment is already finished at the time of its transfer only.

MPV:  Multiple Voucher (Redeemable Fully or Partially)


Each redemption of MPV is considered as supply

As tax determination is not possible at the time of transfer, GST is leviable at the time of its redemption (multiple/single). If in case, actual amount of the MPV is not clear then whole monetary value shall be treated as taxable amount.




Gift Card


Instruments are usable for reducing the price of a good/ service without creating an obligation.


Purchase time shall be treated as supply if the monetary values are clear

Not taxable as its value is already taxed at the time of its supply. Further, gifts given to employees are also not taxable in terms of section 7 [Schedule III] of CGST Act signifying the contractual relation between employee and employer.
Free Samples


Complimentary Stuff

Product/Services used as trial or adds value to another order  

Each transaction examined in terms of section 7 [Schedule I & II] of the CGST Act

Severity of the Present Cluster

With the above entailed table, the reader may get a fair idea regarding the meaning as well as the taxability of different instruments came across with the tag of monetary benefits. Being a pre-sale concurrence activity, Trade & Cash Discount, disputes are settled to a certain extent as it can be adjusted with the turnover or ITC can be availed complying with the provision of ‘Value of taxable supply’ [section 15 of CGST Act]. This position can also be substantiated by the Orissa High Court’s judgment in M/s Sun Pharmaceuticals Industries Ltd. versus State of Orissa [STREV No. 25 of 2013 dated 06 July 2022], Authority for Advance Ruling (AAR) of Madhya Pradesh in M/s Rajesh Kumar Gupta of M/s Mahaveer Prasad Mohanlal [Case No. 07/2021 dated 07 January 2022] & Appellate Authority for Advance Ruling (AAAR) of Tamil Nadu in M/s GRB Dairy Foods Pvt. Ltd. [TN/AAAR/04/2022(AR) dated 23 February 2022]. One of the main criteria of litigation in discount related matters are the occurrence of an event between the two parties, targeting the said scenario incentive received was not considered as trade discount in M/s Mek Peripheral India Pvt. Ltd. [GST-ARA-59/2020-21/B-56].

Along with the above concerns, strategies of Free Samples or Complimentary Stuff (product/service) are also used to captivate the whole market to remain customers’ favorite. The taxability of these promotional techniques are decided as per section 7 [Schedule I (Activities to be treated as Supply even if made Without Consideration i.e. employer-employee relationship & supply in the course of furtherance of business between related/distinct persons) & Schedule  II (Activities or Transactions to be treated as Supply of Goods or Supply of Services)] of the CGST Act. Analyzing the said provision ITC was disallowed in the case of M/s KPH Dream Cricket Pvt. Ltd. [01/AAAR/CGST/KPH/2022] where complimentary/free tickets were distributed to local government authorities or officials or consultants etc. as goodwill gesture for business promotion.

In similar manner, exigibility of complementary or sample stuff can also be decided as happened in AAAR in the case of M/s Golden Tobie Pvt. Ltd. [UP ADRG 84/2021] where extra packages of cigarettes were supplied without contradicting conditions specified in schedule I (supra).

Not only by the adjudicating/appellant authorities; this stand is also clarified by CBEC vide Circular No. 92/11/2019-GST dated 07 March 2019 and Circular No. 105/24/2019-GST dated 28 June 2019 [withdrawn vide Circular No. 112/31/2019 – GST dated 03 October 2019].

Now talking about the vouchers/coupons & gift cards, these concerns are not an easy task to understand as it is more complex than trade or cash discount system. Further, there are many ongoing controversial orders trigger the tax implications again & again which creates confusion in taxpayers’ mind.

Like, in the case of M/s Kalyan Jewellers India Ltd. [Case No. TN/AAAR/11/2021 (AR) dated 30 March 2021] Tamil Nadu AAAR has upheld the order passed by the advance ruling authority and observed that “Voucher by GST law is recognized as an instrument of consideration (non-monetary form) for future supply. Regarding classification of voucher, since voucher is only an instrument of consideration and not goods or services, the same is not classifiable separately but only the supply associated with the voucher is classifiable according to the nature of the goods or services supplied in exchange of the voucher earlier issued to the customer.” With the said observation, AAAR has modified the AAR order and held that “time of supply of the gift vouchers/gift cards by the applicant to the customers shall be the date of issue of such vouchers [section 12(4) of CGST Act] and the applicable rate of tax is that applicable to that of the goods.”

Whereas, AAAR of Karnataka has upheld the AAR order in the case of M/s Premier Sales Promotion Pvt. Ltd. [Case No. KAR/AAAR/ 11/2021-22 dated 22 December 2021] wherein it was concluded that “the vouchers traded by the Appellant are goods and not actionable claims, we hold that the supply of vouchers by the Appellant is a supply of goods in terms of Section 7 of the CGST Act. We are in complete agreement with the ruling given by the lower Authority on the aspect of value of the vouchers for the purpose of GST, the rate of tax and the time of supply of the vouchers by the Appellant. Since the Appellant is not the issuer of the voucher, the provisions of time of supply under Section 12(4) (date of issuance or redemption) will not apply and the time of supply will be governed by the provisions of Section 12(5) (date of return filing or tax paid) of the CGST Act.”

Being aggrieved with the above AAAR order, assessee/taxpayer has knocked the doors of high court by filing Writ Petition No. 5569 of 2022 [M/S Premier Sales Promotion Pvt Ltd. versus UOI] whereby, in present case vouchers are semi-closed to PPIs; which can be issued only with the prior approval of Reserve Bank of India (RBI). Accordingly, it was held that as the transaction between assessee and his clients is procurement of printed form, which are like currency; and value printed on the form can be transacted only at the time of redemption. Therefore, issuance of voucher is similar to pre-deposit and not supply of a good/service; hence, it cannot be taxed under GST.

Referring, above judgement, AAR Karnataka has answered in negative against the query raised by M/s Myntra Designs Pvt. Ltd. [Case No.- KAR/AAAR/03/2023] on the ITC eligibility of vouchers, by observing that if vouchers are not exigible then question of ITC cannot arise in terms of the basic fundamental of ITC Mechanism enumerated under Chapter V of CGST Act.

Considering the binding effect of court’s ruling, it can be assumed that impugned confutation may have settle to some extent. However, as the dimensions of the trade & discounts ideas are not static, any new diversion may initiate fresh/inter-connected chaos which definitely leads to more litigation as well as advance ruling applications; which not just be costly for taxpayers but also creates, inconsistency in the views of different GST departments.


The battle of taxability and non-taxability is a never-ending story and especially in present case, the confusion is somehow inevitable, as various kinds of vouchers/coupon discounts or gift cards has different tax implications depending upon the nature of each transaction. Moreover, considering the regular technological upgradation, such instruments will surely expand their scope of activities like; stepping into virtual currencies like cryptocurrencies.

In lime light of above, it can be traced that present concern has endless discussion scope; hence the taxpayer has to act cautiously while using any kind of PPIs as while choosing terminology for its name and framing the nature of the transaction with an intent to minimize future disconcertment of litigation.

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