BI Worldwide India Pvt. Ltd. Vs Additional Director
Date: July 22, 2025
Subject Matter
GST Demand on Voucher Trading Quashed
Summary
The petitioner, a company providing employee and customer engagement solutions, filed a writ petition challenging a show cause notice (SCN) and a GST demand for CGST, KGST, interest, and penalties. The demand was based on the petitioner's business of purchasing and selling vouchers and gift cards. The petitioner argued that its activity is a pure trading of vouchers on a principal-to-principal (P2P) basis, and the margin earned from this is not subject to GST.
The petitioner explained its business model: it buys vouchers from vendors at a discounted rate (e.g., Rs. 95) and sells them to its clients at face value (e.g., Rs. 100), with the difference constituting its trading margin. The petitioner claimed that this falls under a trading activity, which is not a "supply of goods or services" under the GST Act. It cited Circular No. 243/37/2024-GST dated December 31, 2024, which clarifies that pure trading of vouchers on a P2P basis is not leviable to GST.
The revenue department, represented by Mr. Jeevan J. Neeralgi, contended that the petitioner provides services to its clients in addition to trading vouchers, and that these services should be exigible to GST. He referred to a section of the same circular which states that commissions or fees received by agents distributing vouchers are subject to GST.
The High Court analyzed the nature of the petitioner's transactions in light of the cited circular.
The High Court found that the petitioner's business model was clearly a P2P transaction. The petitioner purchases and owns the vouchers before selling them to clients at a profit margin. The court determined that the petitioner was not acting as an agent on a commission/fee basis for the original voucher issuer, which would have made its services taxable. Instead, the petitioner's activities fit the first model described in the circular—trading of vouchers on a P2P basis.
The court, therefore, ruled that the petitioner's transactions were not a "supply of goods or services" and were not subject to GST. The court quashed the impugned show cause notice and allowed the writ petition.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
Petitioner is before this court seeking for the following reliefs:
(a) Issue a writ of certiorari or writ in the nature of certiorari or any other appropriate writ or order or direction under Article 226 of the Constitution of India quashing the impugned show cause notice F. No.DZU/INV/C/GST/1652/2021/Pt.II/4048 dated 31.07.2024 bearing DIN 202407DNN000008171EO issued by the respondent No.1 enclosed at Annexure-A demanding CGST, KGST along with interest, penalty and personal penalty.
(b) hold that the margin earned by the petitioner in distributing (purchase and sale) of vouchers / gift cards is excluded from the levy of GST and accordingly, the petitioner is not liable to pay any CGST or KGST as proposed to be demanded in the impugned show case notice; and
(c) pass such further order(s) and other reliefs as the nature and circumstances of the case may require.
2. The petitioner is engaged in employee Engagement, customer engagement and providing channel loyalty solution for diverse corporate clients. In furtherance of the same, the petitioner purchases vouchers of different products of different brands and makes it available to its clients for distribution amongst the person that they choose to distribute.
3. The contention of the learned counsel for the petitioner is that,
3.1. In terms of the agreement between the petitioner and its client the petitioner is entitled to 5% margin on the said vouchers/gift cards he illustrates it by submitting that if a voucher has a face value of Rs.100/-, the same is purchased by the petitioner at Rs.95 and sold to its client at Rs.100/-, which is thereafter distributed by the petitioner’s client to its employees or the like.
3.2. The respondents have made the entire transaction of purchase of the voucher exigible to GST, which cannot be done so inasmuch as the Circular No.243/37/2024-GST dated 31.12.2024 clarifies the position and has categorically indicated that such trading of vouchers would not be leviable to GST.
3.3. What the petitioner has been involved in is only trading of the vouchers for a margin of Rs.5/- or any other amount. As regards the margin received by the petitioner, income tax is being paid thereon, and there are no service or goods which forms part of the transaction which is exigible to GST.
4. Mr.Jeevan J.Neeralgi, learned counsel for the revenue, would submit that by making use of trade in voucher/gift cards, the petitioner is also providing services to its clients and as such, these services would also be exigible to GST. He further submits that in the very same clarification issued in the aforesaid circular, where vouchers are distributed using these distributors / sub-distributors / agents on a commission/fee basis, any amount which is received as commission or fee or any other amount by whatever name called, would be exigible to GST. On that ground, he submits that the above petition is required to be dismissed.
5. Heard Mr.Ravi Raghavan, learned counsel appearing for the petitioner and Mr.Jeevan J. Neeralgi, learned counsel for respondent Nos . 1 and 2. Perused the papers.
6. The short point that would arise for consideration in the present matter is whether the transaction entered into by the petitioner in purchasing the vouchers/gift cards from the vendors and sale thereof to the clients of the petitioner, would be exigible to GST?
7. The issue in this regard has been dealt with by the Circular No.243/37/2024-GST dated 31.12.2024 as issue number two and the clarification issued as regards the said issue is reproduced hereunder for easy reference:
Issue 2-What would be the GST treatment of transactions in vouchers by distributors/sub-distributors/agents. etc.?
4.1 xxxx
4.2 Where vouchers are distributed through the distributors/sub-distributors/dealers on Principal-to-Principal(P2P) basis: In such cases, the distributor/dealer purchases voucher from the voucher issuer typically at a discounted rate and subsequently sells the same to the sub-distributors, corporates or end customers and generate revenue through a trading margin, which is a difference between the acquisition cost and the selling price of the vouchers by the said distributor/dealer. In such cases, distributors/dealers (including subdistributors) own the vouchers and operate autonomously with full control over the process from purchase to the final sale of the vouchers to the end user.
4.2.1 As per section 9(1) of CGST Act. GST is chargeable on the supply of goods and/or services. As the transaction in vouchers is neither supply of goods nor supply of services, therefore, pure trading of vouchers in this case would not constitute either supply of goods or supply of services. Accordingly, such trading of vouchers would not be leviable to GST as per Section 9(1) of CGST Act.
4.3 Where vouchers are distributed using distributors/sub-distributors/agents on commission/fee basis: In such cases, the transactions between the voucher issuer and the distributors/sub-distributors/agents are on principal-agency basis. These arrangements, as per contract/agreement between distributor/sub-distributor/agents and the voucher issuer may specify a set of obligations on such agents such as marketing & promotion and other related support activities for distribution of vouchers against a commission/fee or any other amount by whatever name called, for such purpose. In such cases, distributors/sub-distributors/agents do not operate autonomously, do not own the vouchers and only act as agent of the voucher issuer. In such cases, GST would be payable by such distributor/sub-distributor/agent, acting as an agent of the voucher issuer, on the commission/fee or any other amount by whatever name called, for such purpose, as a supply of services to the voucher issuer.
8. A perusal of the above clarification would indicate that as per the revenue, there are primarily two models for distribution of vouchers. The first where they have distributed through distributors/sub distributors/dealers on a principal to principal basis; and the second were distributed on commission/fee basis.
9. Taking the second aspect first since the reliance is placed on the second set of transaction by the revenue, what could be seen is that such a arrangement is one where there is a contract or agreement between the distributor/sub- distributor/Agent and the voucher issuer and there is obligation on the part of the agents to market and promote the said voucher, provide related support activities for distribution of vouchers against the commission/fee and it is this commission/fee which is exigible to GST.
10. The transaction which has been entered into by the petitioner is different inasmuch as the petitioner purchases the vouchers from the voucher issuer and sells it to its client at a margin mutually agreed between the petitioner and its client.
11. The petitioner is not rendering any services to the voucher issuer as regards marketing and promotion and or distribution of vouchers. In fact, primarily in the present case, the petitioner is rendering services to its clients by making available the vouchers as a part of the services being rendered by the petitioner to its client. The distribution of vouchers is not the primary business of the petitioner under the agreement, but it is a part thereof.
12. In that view of the matter, there is a clarification at clause 7.2 above, which would be applicable inasmuch as the petitioner has purchased the voucher from the voucher issuer at a discounted rate and subsequently has sold the same to the sub-distributors / Corporates or in-customers and generates revenue through trading margin, which the circular makes it clear will not be exigible to GST as per Section 9(1) of CGST Act.
13. In that view of the matter, I pass the following:
ORDER
(i) The writ petition is allowed.
(ii) Certiorari is issued. The impugned show cause notice F.No.DZU/INV/C/GST/1652/2021/Pt.II/4048 dated 31.07.2024 bearing DIN 202407DNN000008171EO issued by the respondent No.1 at Annexure-A is quashed.