Quick answer
A store gift card is usually treated as a way to pay, not as a sale of goods, so GST is charged when the card is spent on products rather than when the card is bought. Set clear expiry and terms, keep gift card amounts out of offer minimums, and promote cards to late festive shoppers. Check with a CA.
When you sell a gift card for your own store, GST is generally charged when the card is spent on products, not when the card itself is bought, because the card is a way of paying rather than a sale of goods. The tax then follows the GST rate of whatever the customer buys with it. Gift cards are a simple way to win late festive shoppers, bring new customers through existing ones and keep money in your store. You need clear terms on expiry and use, and your CA should confirm the treatment for your business.
Why is GST charged when the card is spent?
Think about what a gift card is. When someone buys a ₹2,000 gift card, you have not supplied any goods yet. You do not even know what will be bought: a 5% GST item or an 18% item. The card is a promise to accept it as payment later. Charging GST at the time of sale would mean guessing the rate, and charging GST again when the products are bought would tax the same sale twice.
So the common approach for a store's own gift cards is: no GST on the card itself, and normal GST on the products when the card is redeemed, based on each product's rate. The GST law on vouchers has been the subject of rulings, clarifications and debate over the years, and the treatment can differ for vouchers that can only be used for one specific item, or for cards sold by third parties. This is general information, not tax advice. Ask your CA to confirm how it applies to you.
How does that look on an invoice?
Say a customer buys a ₹2,000 gift card. The receipt for that payment shows the card, with no GST charged. Later, the person who receives the card buys a ₹1,500 cotton saree (GST included in the price) and pays fully with the card. The order invoice for the saree shows the usual GST on the saree, with the gift card recorded as the payment method. ₹500 stays on the card for next time. These amounts are illustrative.
How do gift cards work on UpMinutes?
- Sold as a product: you add gift cards to your store like any product, with the amounts you choose.
- Emailed with a message: the buyer can send the card to someone else with a personal note.
- Spent in parts: the balance stays on the card until it is used up.
- No GST on the card itself; GST applies when the card is spent, worked out on the products bought, on the order's GST invoice.
- Kept out of offer minimums: gift card amounts do not count towards coupon or free-delivery minimums, so a card purchase cannot unlock a discount on itself.
- Expiry reminders: customers get a reminder before a card expires.
- On or off: you can switch gift cards on or off for your store.
Separately, store credit lets you refund a return as credit to spend later, which works similarly for the customer. Our post on refunds and credit notes explains the accounting side of refunds.
How are gift cards different from coupons and store credit?
The three are easy to mix up. A gift card is bought with real money, so its balance is money the customer has already paid you. A coupon is a discount you give away; it reduces the price, and GST is worked out on the reduced price. Store credit is usually issued by you instead of a refund, for example after a return, and is spent like a gift card balance. Keeping them separate matters for your accounts and for your offers: a coupon should not be sold, and a gift card should not be handed out as a free discount without your CA knowing how you record it.
What terms should a gift card have?
| Term | What to decide | Tip |
|---|---|---|
| Expiry | How long the card is valid | Long enough to be fair; a year is common. State it clearly. |
| Partial use | Can the balance be used over several orders? | Yes, if possible; customers expect it. |
| Cash refund | Can unused balances be withdrawn as cash? | Usually no; say so in the terms. |
| Offers | Can cards be used with coupons and sales? | Usually yes, as a payment method. |
| Lost cards | What happens if the email is lost? | Keep records so you can resend the code. |
| Returns | If an order paid by gift card is returned? | Refund to the card or as store credit. |
Put these terms on the gift card product page and in your policies. Our guide to store policies every Indian online store needs covers the rest of your policy pages.
When do gift cards sell best?
- Festivals after the shipping cut-off: when it is too late for a parcel to arrive before Diwali, Raksha Bandhan or Christmas, a gift card arrives instantly by email.
- Weddings and housewarmings: guests who do not know the couple's taste.
- Birthdays and anniversaries: last-minute gifts for people who live far away, including family abroad who want to send a gift to someone in India.
- Corporate gifting: companies buying several cards for staff or clients. Confirm the invoicing your corporate buyer needs.
- Teachers' Day, Mother's Day and Father's Day.
Plan campaigns around the dates in our festival sales calendar.
How do you promote gift cards?
- Add gift cards to your homepage and navigation in festive weeks.
- After your last shipping date, change your banner to: “Too late for delivery? Send a gift card instantly.”
- Mention gift cards in abandoned-cart and newsletter emails near festivals.
- Offer amounts that match your products: if most items are ₹800 to ₹1,500, offer ₹1,000 and ₹2,000 cards.
- Design the card nicely; it is a gift, so it should feel like one.
Be careful with bonus offers such as “Buy a ₹2,000 card, get ₹200 extra”. They can work, but the bonus is a discount you are funding, and its tax and accounting treatment should be checked with your CA.
What should you track?
- Cards sold and balances outstanding: unused balances are money you owe in goods, not profit.
- Redemptions: how many cards bring in a new customer.
- Extra spend: people often spend more than the card value, which is part of the benefit.
- Expired balances: ask your CA how to treat these in your accounts.
UpMinutes reports show sales, tax and payment mix for any date range, downloadable as CSV or PDF, which makes it easier to share figures with your accountant. For a refresher on GST basics, see GST basics for online sellers.
A gift card setup checklist
- Tax treatment confirmed with your CA
- Gift card amounts chosen to match your typical prices
- Terms written: expiry, partial use, no cash refund, returns
- Gift card design and message tested by sending one to yourself
- Festive promotion planned for after the shipping cut-off
- A monthly check of outstanding balances
Frequently asked questions
Do I charge GST when I sell a gift card?
For a store’s own gift cards, GST is generally charged when the card is redeemed on products, at those products’ rates, not when the card is sold. Confirm the treatment for your business with a CA.
Can a gift card be used with a coupon?
Usually yes, because the card is a payment method. On UpMinutes, the gift card amount itself does not count towards coupon or free-delivery minimums.
Should gift cards expire?
Most stores set an expiry, often a year, and state it clearly at the time of sale. UpMinutes sends customers a reminder before their card expires.
Can customers abroad buy a gift card for someone in India?
Yes, if your store accepts their payment. They will see guide prices in their currency, but the payment is charged in rupees.
