Tds liability on purchase of gift vouchers from flipkart

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Mihir Jhaveri

CA Job

25 Points Posted on 19 January 2015

Query on applicability of TDS on Purchase of Flipkart/ Snapdeal Gift Vouchers for distributing to customers as reward/ sales promotion

Background/ Case facts:

-Our company is purchasing Flipkart/ Snapdeal gift vouchers (GV) and giving to distributors/ customers on achivement of targets

-These GVs are Prepaid Instruments. And companies issuing such GVs has to take RBI approval / purchase GVs through authorised intermediaries having approval from RBI.

-These GVs have fixed validity period. These are non-renewable/ non refundable vouchers. And they have to be redeemed at the time of online purchase of goods/service from the portal.

-Portals (flipkart/snapdeal) are not charging anything extra as service charge for issuing these GVs. And accepting these vouchers as currency/ money at the time of redemption.

-Portals are claming that these GVs are neither "goods" nor "services". Hence they do not apply VAT/ ST while selling these GVs.

-Furhter, sellers of GV also claim that TDS will not be applicable at all.

Query:

-Whether TDS has to be deducted at the time of making payments for purhcase of such GV.

-Is there any circular/ clarification issued by CBDT in this regard?

Thanks in anticipation.

Replies (3)

Quick Summary

The query examined whether TDS applies on the purchase of Flipkart or Snapdeal gift vouchers distributed as sales incentives. The response suggested that no TDS is applicable, as gift vouchers function like prepaid instruments or advances for future purchases and are not treated as services. Further discussion highlighted that vouchers may be redeemable for both goods and services, creating ambiguity in their tax characterization, but no specific CBDT clarification was cited.

Manoj BG

Tax Professional and in Service

1637 Points Posted on 19 January 2015

Hi Mihir,

No TDS applicable in this case as underlying transaction is sale of goods against the vouchers. Gift Vouchers on flipkart/Snap deal can be redeemed basically for purchase of goods. So sale of gift vouchers for redemption against purchase of goods is as good as advance received for sale in hands of Flipkart/Snap deal although there is no surety that gift vouchers will actually redeem in given time.

Thanks and Regards,

Manoj B. Gavali

Mihir Jhaveri

CA Job

25 Points Posted on 19 January 2015

Thanks Manoj.

Two followon questions....

1. GV sellers are claiming this is not sale of goods and not sale of services as well. If we consider this as sale of goods, should we not expect that the invoice should have VAT/CST TIN # mentioned thereon? As well as VAT/CST not applied seperately in the invoice.

2. GV holder can purchase goods as well as avail services from portal. Since there is no such restriction. Thus it may not amount to sale of goods at all times.

Originally posted by : Manoj B. Gavali
	Hi Mihir, No TDS applicable in this case as underlying transaction is sale of goods against the vouchers. Gift Vouchers on flipkart/Snap deal can be redeemed basically for purchase of goods. So sale of gift vouchers for redemption against purchase of goods is as good as advance received for sale in hands of Flipkart/Snap deal although there is no surety that gift vouchers will actually redeem in given time. Thanks and Regards, Manoj B. Gavali

Aashok Kumar Sharma

Finance/Compliance Consultant

77979 Points Posted on 06 November 2026

Current position (it has changed since this thread):

• On purchasing the vouchers: no TDS. A voucher is an "instrument" (neither goods nor services). CBIC Circular 243/37/2024 dated 31 December 2024 clarifies that voucher trading is not itself a supply, so no GST arises on buying or distributing vouchers.

• On giving them to distributors or customers who are businesses: Sec 194R (from 1 July 2022) requires 10% TDS where the total value of benefits to a person exceeds Rs 20,000 in a year. Gift vouchers given as target-achievement rewards are squarely covered (CBDT Circulars 12/2022 and 18/2022). For benefits in kind, ensure tax is paid before release.

• Retail customers who are not in business: 194R does not apply.

• Accounting: debit sales promotion (business promotion) when the vouchers are distributed, not when purchased. Hold undistributed vouchers as current assets.

• Employees: vouchers are a perquisite (Sec 17(2)) and taxed through payroll, with Rs 5,000 a year exempt as a gift (Rule 3(7)(iv)) in the old regime.