Published 26 October 2026
A retailer sells gift cards. A distributor buys vouchers from a brand at a discount and sells them to companies, which hand them to employees and customers. Some cards are never redeemed. For seven years the law gave vouchers a time-of-supply rule of their own, and tax officers and businesses disagreed over whether a voucher was itself goods, whether a distributor’s trading margin was taxable, and whether unredeemed balances were income for a service. All three questions now have answers. CBIC’s Circular No. 243/37/2024-GST of 31 December 2024 clarified that transactions in vouchers are neither a supply of goods nor a supply of services; only the goods or services the voucher is redeemed for are taxed. The Finance Act, 2025 then omitted the voucher rules in sections 12(4) and 13(4) from 1 October 2025.
This guide sets out the position as it stands on 23 October 2026, and what remains in the Act and rules.
What a voucher is
Section 2(118) defines a voucher 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 the 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”
The definition remains in the Act. A voucher may be a single-brand gift card, a multi-brand card, a paper gift voucher or a code delivered electronically. What it has in each case is an obligation on a supplier to accept it as payment.
Not a supply: the circular’s reasoning
The circular (paras 3.4 to 3.7) works through two possibilities.
- Prepaid payment instruments. Where the voucher is a prepaid payment instrument recognised by the Reserve Bank of India “and is used as a consideration to settle an obligation”, it falls within “money” under section 2(75). Money is excluded from both “goods” (section 2(52)) and “services” (section 2(102)).
- Other vouchers. Where the voucher is not such an instrument, it is in the nature of “an actionable claim”, as defined in section 3 of the Transfer of Property Act, 1882. Paragraph 6 of Schedule III treats “Actionable claims, other than specified actionable claims” as neither goods nor services. Vouchers are not betting, casinos, gambling, horse racing, lottery or online money gaming, so they are not specified actionable claims.
The conclusion (para 3.7) covers both:
“irrespective of whether voucher is covered as a pre-paid instrument recognized by RBI or not, the voucher is just an instrument which creates an obligation on the supplier to accept it as consideration or part consideration and the transactions in voucher themselves cannot be considered either as a supply of goods or as a supply of services. However, supply of underlying goods and/or services, for which vouchers are used as consideration or part consideration, may be taxable under GST.”
The 2025 omission of sections 12(4) and 13(4)
Until 30 September 2025, section 12(4) (goods) and section 13(4) (services) read:
“In case of supply of vouchers by a supplier, the time of supply shall be- (a) the date of issue of voucher, if the supply is identifiable at that point; or (b) the date of redemption of voucher, in all other cases.”
Sections 122 and 123 of the Finance Act, 2025 omitted both sub-sections. Notification No. 16/2025-Central Tax of 17 September 2025 appointed 1 October 2025 as the date on which those sections came into force. CBIC’s text of the Act now shows both sub-sections as omitted from that date.
The omission removes the rule that could tax a single-purpose voucher on the date it was issued. For supplies before 1 October 2025, the old sub-sections still govern the time of supply (Time of Supply).
Two things were not omitted, according to CBIC’s texts of the Act and rules as published in October 2026:
- Section 2(118), the definition of voucher.
- Rule 32(6), which values a voucher: “The value of a token, or a voucher, or a coupon, or a stamp (other than postage stamp) which is redeemable against a supply of goods or services or both shall be equal to the money value of the goods or services or both redeemable against such token, voucher, coupon, or stamp.” The rule sits within rule 32, which applies “at the option of the supplier”.
Distributors: trading or agency
The circular (Issue 2) distinguishes the two ways vouchers reach the market.
- Principal-to-principal. A distributor that buys vouchers from the issuer, usually at a discount, owns them, and sells them at its own price “operate[s] autonomously”. Its trading “would not be leviable to GST”, because the vouchers are neither goods nor services (para 4.2.1).
- Commission or fee. A distributor that markets vouchers for the issuer against a commission or fee, without owning them, acts as the issuer’s agent. GST is payable on “the commission/fee or any other amount by whatever name called” as a supply of services to the issuer (para 4.3).
Under Issue 3, separate charges for advertisement, co-branding, customisation, technology support or customer support, made to the issuer by a distributor or anyone else, are taxable at the applicable rate (para 5.1).
Unredeemed vouchers (breakage)
Under Issue 4, where a voucher expires unredeemed and the issuer recognises the amount as income, “there is no redemption of voucher and there is no supply of underlying goods and/or services”. The amount “cannot be construed as consideration for any supply”. Relying on Circular No. 178/10/2022-GST, the circular also rejects the view that the holder’s failure to redeem is a forbearance supplied to the issuer, unless there is an “express or implied agreement” to pay a charge for non-redemption. It concludes that “no GST appears to be payable” on breakage (paras 6.2 and 6.3). Circular No. 178/10/2022-GST is covered in Liquidated Damages, Notice Pay and Penalties.
When tax falls on the underlying supply
With the voucher rules gone, the supply for which a voucher is redeemed takes its time of supply from the general rules.
- Goods: under section 12(2), the date of the invoice or the last date for issuing it, or the date of receipt of payment if earlier. Notification No. 66/2017-Central Tax removes the payment limb for suppliers of goods other than composition taxpayers. So money received when a voucher is sold does not, by itself, create a liability on goods.
- Services: under section 13(2), the earlier of the invoice (if issued in time) and the receipt of payment. There is no counterpart to Notification No. 66/2017 for services.
Neither the circular nor the 2025 amendment addresses whether money received when a voucher redeemable only for a specified service is sold is “payment” for that service under section 13(2). The circular treats the voucher sale as a transaction in an instrument, not as a supply. A supplier redeeming the voucher records the voucher’s face value as consideration, and rule 32(6) values the supply at the money value of what is redeemed.
Vouchers given to employees and customers
A business that buys vouchers to give away pays no GST on them, so it has no credit to claim on the voucher. Where a voucher is given to an employee, Circular No. 243/37/2024-GST treats the voucher as neither goods nor services. That bears on whether the gift falls within paragraph 2 of Schedule I, which speaks of a “supply of goods or services”. The treatment of gifts to employees generally is covered in Gifts and Perquisites to Employees.
What each party needs
| Item | Where it comes from |
|---|---|
| Voucher terms: what it is redeemable for, which suppliers, expiry | Programme documents |
| Whether the voucher is an RBI-recognised prepaid payment instrument | The issuer’s PPI authorisation |
| The distribution contract: purchase and resale, or commission | Distribution agreement |
| Separate fees for marketing, co-branding, technology | Agreements, invoices |
| Redemptions by period, at face value | Point-of-sale or programme records |
| Breakage recognised as income | Books |
Reporting, timing and signing
The issuer and a principal-to-principal distributor charge no GST on the sale of vouchers, and issue no tax invoice for it. Tax is charged when the voucher is redeemed against a taxable supply, on the invoice for that supply.
An agent distributor issues a tax invoice for its commission under section 31. It reports the invoice in table 4A of GSTR-1 and pays the tax through table 3.1(a) of GSTR-3B. The issuer takes credit on it, subject to section 16.
Due dates and signing. GSTR-1 is due by the 11th of the following month (13th after the quarter for QRMP filers, Notification No. 83/2020-Central Tax). GSTR-3B is due by the 20th, or the 22nd or 24th after the quarter, under rule 61. Returns are verified by DSC, which companies must use, or by EVC, under rule 26. The portal steps are in Filing GSTR-1 and Filing GSTR-3B and Paying the Tax.
Interest and corrections
Tax not paid on a taxable commission or on a redemption carries interest at 18 per cent a year under section 50(1). A business that paid tax on voucher sales before the circular can adjust it only through a credit note within the section 34 time limit, or by a refund claim. The credit note limit is 30 November after the end of the financial year, or the annual return if earlier. For periods up to 30 September 2025, the omitted sections 12(4) and 13(4) still govern the time of supply. The routes are in Correcting Mistakes in Returns.
The sequence
- Check that the instrument is a voucher under section 2(118).
- Treat the issue, sale and resale of vouchers as neither goods nor services (Circular No. 243/37/2024-GST).
- For distributors, decide from the contract whether the business buys and resells (no GST on the margin) or acts on commission (GST on the commission).
- Charge GST on separate marketing, co-branding and technology fees.
- Tax the underlying goods or services when the voucher is redeemed, under sections 12(2) and 13(2) for supplies on or after 1 October 2025, valuing the supply under rule 32(6) where that option is used.
- Treat breakage as not taxable, unless the terms charge the holder for non-redemption.
- For periods up to 30 September 2025, apply the omitted sections 12(4) and 13(4).
The next guide in this set covers Services by Directors.