🧾 Kalyan Jewellers GST Ruling: AAAR Tamil Nadu Clarifies Time of Supply and Tax on Gift Vouchers (2021)

AAAR Tamil Nadu Ruling on Kalyan Jewellers:The ruling in In Re: M/s Kalyan Jewellers India Ltd. [2021 (4) TMI 885 (AAAR, Tamil Nadu)] addresses one of the most debated issues under GST — the time of supply and taxability of gift vouchers or pre-paid instruments (PPIs).

Kalyan Jewellers India Ltd., a well-known manufacturer and retailer of gold jewellery, introduced different types of gift cards and vouchers as part of its marketing and promotional strategy. These vouchers were offered through various channels such as retail stores, third-party issuers, and online platforms, and were redeemable against the purchase of jewellery.

The company sought clarity on whether issuing such vouchers constituted a supply under GST and, if yes, when the liability to pay GST arises — at the time of issue of the voucher or upon its redemption.

📌 Facts of the Case

AAAR Tamil Nadu Ruling on Kalyan Jewellers Kalyan Jewellers dealt with two categories of Pre-Paid Instruments (PPIs):

1. Closed System PPIs

• Issued directly by Kalyan Jewellers upon receiving payment of face value.
• Redeemable only at the company’s own outlets for purchase of jewellery.
• The company retained full control over issuance and redemption.

2. Semi-Closed / Co-Branded PPIs

• Issued by third-party PPI issuer Quick Silver Solutions Pvt. Ltd. under an agreement with the assessee.
• The third party purchased these PPIs from Kalyan Jewellers at a discounted value and sold them to customers at face value.
• The vouchers were redeemable at Kalyan Jewellers stores for jewellery purchases, and the difference (face value minus discounted value) served as the third party’s incentive.

❓ Point of Dispute

The assessee approached the Authority for Advance Ruling (AAR), Tamil Nadu seeking clarity on:

1. Whether the issuance of gift vouchers or gift cards amounts to a supply of goods or services under the GST law.
2. If so, what is the time of supply for such vouchers — at issuance or redemption.

⚖️ Submissions by the Assessee

• Vouchers as Actionable Claims:
  Vouchers merely represent a right to receive goods in the future and are, therefore, in the nature of actionable claims, excluded from the scope of supply under Section 7 of the CGST Act.
• No Intrinsic Value:
  Vouchers have no standalone market value — they only serve as a medium of payment when redeemed.
• Avoidance of Double Taxation:
  Levying GST at the time of issuing vouchers would result in double taxation, since tax would again apply on the sale of jewellery when the voucher is redeemed.

📜 Findings of the AAR

The AAR, Tamil Nadu, rejected the assessee’s arguments and ruled that:

• The Closed PPIs issued by Kalyan Jewellers qualify as vouchers as per Section 2(118) of the CGST Act, 2017.
• Since the vouchers were redeemable only against the supply of jewellery, they represented a supply of goods.
• The time of supply was:
  • Date of issue, if the voucher was specific to identifiable goods; or
  • Date of redemption, if the voucher could be redeemed for any goods.

Aggrieved by this ruling, the assessee appealed to the Appellate Authority for Advance Ruling (AAAR), Tamil Nadu.

🧭 Findings of the AAAR

The AAAR, Tamil Nadu substantially modified the ruling and made the following key observations:

1. Vouchers Are Neither Goods nor Services

• A voucher per se is not a supply — it merely represents an instrument of consideration.
• It is a means of payment for future supply and does not independently qualify as goods or services.
• Therefore, the classification of vouchers as “goods” or “services” is incorrect.

2. Determination of Time of Supply

• Sections 12(4) and 13(4) of the CGST Act govern the time of supply for vouchers.
• If the voucher identifies specific goods or services, the time of supply arises on the date of issue.
• If the voucher is not linked to specific goods, the time of supply is on redemption.
  Since the vouchers in question were redeemable specifically for gold jewellery, the AAAR held that the time of supply is the date of issue.

3. No Double Taxation

• GST paid at the time of voucher issuance is deemed as tax on the underlying supply (jewellery).
• When the voucher is redeemed later, no further GST is payable, thus avoiding double taxation.

🧑‍⚖️ Held

The AAAR concluded as follows:

• Vouchers are neither goods nor services, but merely instruments of payment.
• The time of supply of such vouchers is determined as per Section 12(4) of the CGST Act.
  • For gold vouchers, the date of issue is the relevant time of supply.
• The applicable GST rate is that of the underlying goods (gold jewellery).

💡 Remarks & Implications

• The ruling aligns with the GST principle that tax should apply at the point of supply, not on financial instruments.
• The AAAR’s clarification ensures consistent treatment of vouchers, balancing tax collection and avoidance of double taxation.
• The assessee has challenged the ruling before the Madras High Court, which has granted interim stay, and the matter is pending.
• In a related case, the Karnataka AAAR in Premier Sales Promotion Pvt. Ltd. [2021 (12) TMI 1299] held that supply of vouchers is supply of goods, indicating divergence in interpretation across States.

🔍 Key Takeaways

1. Vouchers are not goods or services but act as payment instruments.
2. Time of supply depends on whether the voucher specifies identifiable goods.
3. No double taxation — GST at issuance substitutes tax on redemption.
4. Legal clarity is still evolving, with different AAAR interpretations in various States.

🏢 Practical Impact for Businesses

• Businesses issuing gift cards or PPIs must carefully determine the nature of the voucher (specific vs. open-ended).
• Closed-system vouchers tied to specific goods trigger GST at issuance, while open vouchers defer GST until redemption.
• Accounting and compliance teams should align GST reporting with the AAAR’s guidance to prevent future disputes.

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