To Pay or Not to Pay: High Court Rules Vouchers Exempted from GST Levy

In the midst of the Digital India revolution, the gifting industry has undergone a significant transformation. With the rise in popularity of gift cards, E-vouchers, cash-back vouchers, and other forms of vouchers, buyers and receivers are presented with greater flexibility and convenience in their purchasing and usage. From weddings to corporate rewards to promotional schemes, vouchers have become the go-to choice for gifting.

However, until recently, the Goods and Services Tax (GST) liability upon vouchers was unclear. While the government viewed vouchers as taxable under the GST law, voucher trading companies believed that vouchers, being a mode of payment, were neither goods nor services and, therefore, not subject to GST.

In January 2023, the Karnataka High Court examined this issue and concluded that vouchers are exempted from the levy of GST. The High Court based its decision on the nature of these vouchers, which it observed to be semi-closed Pre-paid Payment Instruments (PPI) recognized by the Reserve Bank of India (RBI). Vouchers represent the value of future goods or services to be redeemed and are a means of payment of consideration. They have no intrinsic value of their own and are neither goods nor services. As a result, when a person procures and sells vouchers, it is simply a transaction in money, and there can be no levy of GST on it.

This decision provides clarity on the taxability of vouchers, particularly for organizations involved in procuring and selling them. It is a step in the right direction because imposing GST on voucher trading would lead to double taxation, as the underlying goods or services that are to be redeemed through the voucher already incur GST liability. Such an interpretation would go against the principle of 'One Nation, One Tax,' which is the foundation of GST in India.

It is important to note that companies which procure and sell vouchers will not be eligible for Input Tax Credit (ITC) on goods and services consumed by them since the supply of vouchers is an exempt supply. Consequently, if they have availed of ITC hitherto, they may need to reverse it.


The ruling by the Karnataka High Court that vouchers are exempted from GST levy provides clarity on the taxability of vouchers in India. This is a welcome decision for organizations involved in voucher trading, as it eliminates the possibility of double taxation and ensures compliance with the 'One Nation, One Tax' principle of GST. However, companies that procure and sell vouchers must be mindful of the fact that they will not be eligible for Input Tax Credit on goods and services consumed by them and may need to reverse it if they have availed it earlier.