Show cause notice quashed as trading of gift vouchers held non-taxable under Section 9(1) of the CGST Act

Case Title: M/s BI Worldwide India Pvt. Ltd. & Anr. v. Additional Director, Directorate General of GST Intelligence & Anr.
Court: High Court of Karnataka at Bengaluru
Petition No.: Writ Petition No. 26460 of 2024 (T-RES)
Category: Classification / Taxability – Gift Vouchers
Date of Judgment: 23 July 2025
Relevant Provisions: Section 9(1) of the CGST Act, 2017; Circular No. 243/37/2024-GST dated 31 December 2024

Facts (Paras 2–3)

M/s BI Worldwide India Pvt. Ltd. engaged in employee and customer engagement services, purchased gift vouchers from various brands and resold them to its corporate clients for onward distribution to employees. The petitioner earned a fixed margin (e.g., buying a ₹100 voucher at ₹95 and selling at ₹100). The Directorate General of GST Intelligence (DGGI) issued a Show Cause Notice dated 31 July 2024 alleging that such voucher transactions were exigible to GST, demanding CGST and KGST with interest and penalty.

The petitioner contended that the activity was a principal-to-principal trading transaction—neither a supply of goods nor services—and relied on Circular No. 243/37/2024-GST clarifying that pure trading of vouchers is outside GST ambit. It was argued that income tax was duly paid on the trading margin and that no service or goods were supplied to attract GST.

Question for Consideration (Para 6)

Whether the petitioner’s trading of vouchers/gift cards amounts to a taxable supply under Section 9(1) of the CGST Act, 2017?

Observations (Paras 7–12)

The Court examined the clarification under Circular No. 243/37/2024-GST, which distinguishes two types of voucher transactions:

1. Principal-to-Principal (P2P) – where vouchers are purchased at a discount and resold with a trading margin. Such trading is not supply of goods or services and thus not leviable to GST.

2. Commission/Agency Basis – where distributors act as agents performing marketing or promotional activities for a fee/commission. Such fee-based services are taxable.

Justice Suraj Govindaraj observed that the petitioner’s activity fell under the first category (P2P trading). The company purchased and owned the vouchers before reselling them, with no marketing or promotion undertaken for the voucher issuer. Thus, the margin earned was merely a trading differential and not consideration for any supply of goods or services. Accordingly, the DGGI’s view was inconsistent with the clarification issued under the GST Circular.

Judgment (Para 13)

The Court allowed the writ petition and issued a writ of certiorari, quashing the impugned Show Cause Notice F.No.DZU/INV/C/GST/1652/2021/Pt.II/4048 dated 31.07.2024.
It held that pure trading of vouchers on a principal-to-principal basis is not liable to GST under Section 9(1) of the CGST Act.

Summary of Cases and Circulars Referred

Between Fine Lines

This judgment reaffirms that pure trading in vouchers, where the trader owns and resells vouchers at a margin, is outside the GST net, aligning with the recent circular. Only commission-based promotional services linked to voucher issuers attract GST. Businesses involved in incentive or loyalty programs can rely on this ruling to segregate non-taxable voucher trades from taxable promotional services.

Disclaimer – “The above summary is for academic purpose only; not formal legal opinion. Seek professional opinion before application. Author or publisher or website shall not be responsible for any usage in any form.”