If your business is GST-registered and you sell multi-redemption vouchers (MRVs), it might be confusing figuring out how to account for the Goods and Services Tax (GST) correctly on the vouchers. Read on to find out how you can do so.
What is an MRV?
Before we go into how to account for the GST correctly, remember that not all vouchers are classified as MRVs. The voucher has to meet all the following criteria to qualify as an MRV:
- The voucher is sold for a sum of money.
- The voucher gives the customer a right to redeem goods or purchase services up to the amount stated on the voucher.
- The voucher must be presented or utilised to exchange for the goods and/or services acquired.
- The voucher should not be a product voucher which can only be used to purchase specific goods or services.
An MRV can either be in physical form or be digitally distributed (e.g. unique redemption code). For some examples of MRVs, refer to our handy list.
How to account for GST on the MRV?
1. Sale of own voucher
Mr Electronics owns an electronics store and sells MRVs to his customers. To account for GST on the MRVs, he can choose to do so either upon the sale of the MRV or upon redemption for the goods and/or services at his store. The GST treatment depends on whether Mr Electronics is able to track the redemption of the MRV back to the sales price.
Redemption of the MRV is trackable
Redemption of the MRV is not trackable
2. Sale of vouchers by intermediaries
a) For Businesses acting as Agents
Ms Salesperson sells the MRV on behalf of Mr Electronics and he pays her $100 as a distribution fee. Hence, she is considered as an agent. How does Ms Salesperson account for GST in this instance?
b) For Businesses Acting as a Principal
Ms Baker purchased MRVs from Mr Electronics and sells them to her customers. She is considered a principal. How does Ms Baker account for GST in this instance?
For more information on the GST treatment of other types of transactions involving MRV and non-MRV, check out the e-Tax Guide – GST Treatment of Vouchers.