Bombay High Court Clarifies GST on Vouchers: Only Commission Earned by Distributors Liable, Not Entire Turnover

Background and Challenge
The petitioner challenged an Order-in-Original dated 26 December 2023, which confirmed a GST demand of Rs. 12,66,19,880 and imposed a penalty under Section 73 read with Section 122(2)(a) of the CGST Act, 2017. The demand was based on the difference between the petitioner’s profit and loss account and GST turnover, with the authorities treating the sale and purchase of vouchers as taxable supplies.

Legal Framework and Submissions
The petitioner, an individual dealing in vouchers, argued that vouchers do not constitute goods or services under the CGST Act. Reference was made to Section 2(118) (definition of ‘voucher’) and Section 2(75) (definition of ‘money’) of the CGST Act. The petitioner relied on the Karnataka High Court’s decision in M/s. Premier Sales Promotion P Ltd v. Union of India, which held that vouchers are akin to currency and their issuance is not a supply of goods or services. The petitioner also cited CBIC Circular No. 243/37/2024-GST dated 31 December 2024, which clarified that transactions in vouchers themselves are not taxable supplies; only the commission or fee earned by distributors/agents is subject to GST.

Court’s Analysis
The Court noted that the impugned order treated the entire turnover from voucher transactions as taxable, without adequate consideration of the legal position clarified by the CBIC circular and judicial precedents. The circular expressly states that vouchers are instruments creating an obligation on the supplier and are not themselves supplies of goods or services. GST is only payable on the commission or fee earned by distributors or agents for their services to the voucher issuer.

The Court further observed that the impugned order failed to consider the lack of supporting documentary evidence from the petitioner regarding the nature of the turnover. However, the Court found merit in the petitioner’s contention that the approach of taxing the entire turnover was inconsistent with the law and the clarifications issued by the Board.

Statutory Amendment
The Court also took note of the amendment to Section 12 of the CGST Act by the Finance Act, 2025, which deleted sub-section (4) relating to the time of supply of vouchers, further impacting the taxability of such transactions.

Decision and Directions
In light of these considerations, the Bombay High Court quashed and set aside the demand of Rs. 12,66,19,880 confirmed against the petitioner and remanded the matter to the adjudicating authority for de novo consideration. The petitioner was permitted to file an additional reply, and the authority was directed to grant a hearing and pass a fresh order in accordance with law. The Court clarified that all other contentions regarding the impugned order remain open for adjudication in appropriate proceedings.

Conclusion
This decision reinforces the principle that, under the CGST regime, only the commission or fee earned by distributors or agents dealing in vouchers is liable to GST, not the entire turnover from voucher transactions. The judgment ensures alignment with statutory provisions, judicial precedents, and administrative clarifications, providing significant relief and clarity to entities engaged in the distribution of vouchers.