What Is a Gift Voucher?
A gift voucher is an instrument that a shop, restaurant or brand must accept as full or part payment for its goods or services. Under GST the voucher itself is not taxed: any tax falls on whatever is bought when it is redeemed.
The CGST Act defines a voucher in section 2(118) as an instrument the supplier is obliged to accept as consideration, where the goods or services, or the suppliers, are named on it or in its terms. Around Diwali, which falls on 8 November in 2026, vouchers are one way to give staff gifts, because they let every employee pick what they actually want.
How GST Treats a Gift Voucher
CBIC settled the question in Circular No. 243/37/2024-GST, dated 31 December 2024. Its reasoning runs along two tracks:
- If the voucher is a prepaid instrument recognised by the RBI, it counts as money under the CGST Act when used to settle an obligation, and money is neither goods nor services.
- If it is not, it is an actionable claim, and Schedule III treats actionable claims, other than betting, gambling and similar specified ones, as neither goods nor services either.
But either way, CBIC’s conclusion is the same: transactions in vouchers themselves are not a supply of goods or services. The goods or services later bought with the voucher may be taxable.
Section 12(4), which fixed a separate time of supply for vouchers of goods, was omitted with effect from 1 October 2025, and its counterpart for services in section 13(4) no longer appears in the Act either. Selling a voucher therefore has no separate tax point of its own.
Who Pays GST, and When
| Event | GST? | Why |
|---|---|---|
| Sale | No | Selling a voucher is not a supply of goods or services |
| Redemption | Yes, if taxable | GST on the goods or services bought, at their own rate |
| Resale | No | A dealer trading on its own account makes no supply |
| Commission | On the commission | An agent’s fee is a service to the issuer |
| Unused | No | No supply has taken place |
| Promotion | Yes | Advertising or co-branding for the issuer is a separate service |
The Unused row has a name in the trade: breakage. CBIC’s circular is clear that the amount a seller keeps from unused vouchers is not consideration for any supply, so no GST is due on it.
Gift Voucher Example
A clothing store in Sonipat sells 50 gift vouchers of Rs.2,000 each to a local manufacturer in late October 2026, for its staff’s Diwali gifts.
| Stage | Amount | GST treatment |
|---|---|---|
| Sold | Rs.1,00,000 | No GST charged |
| Redeemed | Rs.82,000 of clothes in November | GST on the clothes, at their rate |
| Unused | Rs.18,000 | No GST |
Note: this is an invented example for illustration only. The businesses and amounts are not real.
The store raises its tax invoice when each employee walks in and picks clothes, not when the manufacturer pays for the vouchers. A shirt paid for entirely with a voucher still carries GST, even though no cash changes hands at the counter.
Where Sellers Get It Wrong
Three errors to avoid:
- Charging GST when the voucher is sold, and then again when it is redeemed, so the same sale is taxed twice.
- Treating a fully voucher-paid bill as zero-value, when GST is due on the goods supplied.
- Paying GST on breakage, which the circular says is not taxable.
Restaurants running their own gift cards face the same rules, and our guide to running a restaurant gift card programme covers the setup side. For the GST on each redemption bill, our GST calculator works out the tax on the goods supplied.
Book Gift Vouchers as Payment, Not Sales
Treat each voucher sold as money received in advance, and each redemption as the sale. Keep a simple register of voucher numbers, values, redemption dates and expiry, so breakage at year-end is a figure you can show rather than estimate. And agree with your CA how unused balances move from liability to income in your books before the first voucher goes out.
Frequently Asked Questions
Yes. The Act’s definition covers instruments accepted as consideration or part consideration. GST is still worked out on the full value of what is supplied, however it is paid for.
No GST is charged when the vouchers are sold, so there is no credit to claim. The tax comes later, on what each employee chooses to buy.
No, because selling a voucher is not a supply. The supply, and the return entry, come in the month each voucher is redeemed.
No. A voucher is a way of paying, so GST falls on the full value of the goods bought with it. A discount coupon lowers the price itself, and a discount shown on the invoice at the time of sale reduces the taxable value.
