Gift vouchers and GST: a salon owner’s guide

For gift vouchers, GST isn’t charged when you sell one. CBIC says a voucher is neither goods nor a service. GST is charged when the voucher is used, at 5% on the full price of the service it pays for, because a voucher pays like cash, not like a discount. A balance that is never used carries no GST at all. The old rule that could tax some vouchers at sale was removed from 1 October 2025. One question is still open: whether wallet top-ups and booking deposits work the same way. Ask your CA.

Gift vouchers and GST: what Circular 243/37/2024-GST says

On 31 December 2024 CBIC issued Circular No. 243/37/2024-GST to settle years of argument about vouchers. Its main points for a salon:

• Selling a voucher isn’t a supply. Transactions in vouchers are treated as neither a supply of goods nor a supply of services, so the sale itself carries no GST.
• The service is taxed when the voucher is used. The voucher is just how the client pays for it.
• Unused vouchers (“breakage”) aren’t taxed. If a voucher expires unused, no service was supplied, so there is nothing to tax.
• Commission is taxable. If a third party sells your vouchers for a fee, that fee is a service to you, taxed as normal.

The old voucher rule ended on 1 October 2025

Sections 12(4) and 13(4) of the CGST Act used to set the “time of supply” for vouchers. A voucher for an identifiable service could be taxed on the day it was issued. The Finance Act 2025 omitted both sub-sections, and CBIC’s text of the Act shows them omitted with effect from 1 October 2025. So the law now matches the circular: no GST when a voucher is sold.

One caution remains. A voucher written for a named service, like “One hair spa”, looks a lot like an advance payment for that service. Keep vouchers as rupee amounts that work on any service or product. That is the clearly safe kind.

Redeeming: a voucher pays like cash, not a discount

This is the mistake that costs salons. When a voucher pays for a service, GST is charged on the full price. The voucher is a payment method, like cash or UPI. It isn’t a discount, so it doesn’t lower the taxable value.

If the bill is bigger than the voucher, the voucher pays its part and the client pays the rest by cash or UPI. GST is still on the whole bill.

A voucher you give away free is different: nobody paid for it. Treat that as a coupon, a discount shown on the bill before GST, and keep it apart from vouchers people bought.

Expiry dates and unused balances

Most salons give vouchers a validity of 6 to 12 months. A clear expiry date is fair to the client and keeps your list of open promises short. Print it on the voucher and say it on WhatsApp when you send it.

• GST on expiry: none. The circular says unused vouchers aren’t taxed.
• Your books: until it’s used, the voucher money is something you owe the client. When it expires, your accountant moves it to income. That is an income-tax and accounting question, not GST.
• Be generous at the edge. A client who comes in two days after expiry and is turned away tells everyone. Decide in advance who may extend a voucher.

How to run gift vouchers well

1. Use codes, not paper alone. A unique code (for example K7PM-4RXQ) that is checked at the till stops photocopied vouchers and double use.
2. Fixed amounts sell best. ₹500, ₹1,000, ₹2,000 and ₹5,000 are easy to choose at Diwali, Rakhi or a birthday.
3. Allow part use. A ₹2,000 voucher spent ₹1,500 now and ₹500 later feels fair.
4. Decide the branches. All branches, or only the ones you choose. Say so on the voucher.
5. Give a receipt, not a tax invoice. The voucher sale isn’t a supply, so the buyer gets a receipt. The tax invoice comes when the voucher is used.
6. Don’t give cash back. A cancelled bill paid by voucher should put the money back on the voucher, not in the client’s hand.
7. Check the list monthly. Open vouchers, used this month, expiring next month. Remind clients before expiry; a reminder brings in a visit.

Vouchers sit alongside points, packages and memberships. Our guide on points or memberships helps you choose what to offer.

Wallet top-ups and deposits: ask your CA

Vouchers are settled. Client wallets and booking deposits are not. For services, GST can fall due on the date payment is received, so money paid in advance for services can be taxable when it comes in. The argument for “GST when spent” is that a wallet balance can be used on anything, services or products, much like a store voucher. No ruling covers salon wallets directly.

A deposit taken for one named appointment, such as ₹2,000 to hold a bridal slot, is closer to an advance for that service. Many CAs treat it as taxable when received. Put both questions to your CA and keep the answer in writing.

Gift vouchers in Frizzi

Gift vouchers come with the Plus plan. Sell one from More → Gift vouchers or from a client’s profile in one tap (₹500, ₹1,000, ₹2,000 or ₹5,000). Each gets an 8-character code, a validity of 1 to 36 months (12 by default), and all branches or the ones you choose. It is sent on WhatsApp. The sale is a receipt, not a GST invoice, and GST is charged when the voucher is spent, on the full price.

A voucher can be used in parts, by anyone holding the code, one per bill. Only an unused voucher can be cancelled, and a cancelled bill puts the money back on the voucher. Expired balances count as income in your profit report. Wallet top-ups are also kept out of GST until spent, which is the point to confirm with your CA. See points and gift vouchers and plans.

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