Time of Supply of Goods – Voucher - GST Ready Reckoner - GST

Time of Supply of Goods Voucher Voucher are commonly used for transaction in the Indian economy. The GST legislation in India has borrowed the definition of voucher from Voucher Directive. whether such prepaid vouchers or gift cards qualify as money since these instruments require prior approval from RBI before their issuance. As per GST law, money includes an instrument recognised by the RBI when used as a consideration to settle an obligation or exchange with Indian legal tender of any denomination. As evident from the definition, had such vouchers or gift cards been capable of being converted into equivalent money, then such instruments could have qualified as money . But vouchers or gift cards (closed and semi-closed pre-payment instruments) can be redeemed only against goods or services. Moreover, money as a legal tender has acceptability across the length and breadth of the country, whereas a voucher can be redeemed only at the premises of the issuer or the participating merchants. Time of Supply Section 12 of CGST 2017 provides for the determination of time of supply in the situations of Supply of vouchers that can be used to pay for goods. Before starting the analysis of about time of supply of goods, we should read time limit of issue of invoice as per section 31 of CGST Act 2017. Time limit for issuance of invoice for supply of goods under section 31 of CGST Act 2017 A registered person supplying taxable goods shall, before or at the time of, - Removal of goods for supply to the recipient, where the supply involves movement of goods ; or Delivery of goods or making available thereof to the recipient, in any other case (in other words movement of goods not involve ) , [section 31(1)] Example ABC placed order to supply of mobile phone to ZYX, who agrees to supply within 10 days from the date of order. It is a case of supply involving movement of goods. VPL a manufacturer asks hi supporting manufacturer Goodluck to develop a mould for PQR for separate consideration. The said mould will kept and used by ABC for manufacture of components for 5 year. In this case, there is no movement of mould. In case of continuous supply of goods , where successive statements of accounts or successive payments are involved - The invoice should be issued before or at the time of issuance of periodical statement or receipt of periodical payment [Section 31(4)]. In case of goods sent or taken on approval for sale or return , are removed before the supply takes place Invoice should be issued before or at the time of supply or 6 months from the date of removal, whichever is earlier [Section 31(7)]. We consider below how the time of supply is determined in each of these situations Time of supply of Vouchers exchangeable for goods Section 12(4) of CGST Act 2017 Voucher are commonly used for transaction in the Indian economy. A shopkeeper may issue vouchers for specific supply i.e., supply is identifiable at the time of issuance of voucher. In trade parlance, these are known as single purpose vouchers. Time of supply is different in case of single purpose voucher and in the case of general-purpose voucher. In case of supply of vouchers the time of supply is - If supply is identifiable then Date of issue of voucher. (Single purpose voucher) If supply is not identifiable then Date of redemption of voucher. (General purpose voucher) Examples:- Example 1 :- Vouchers for pressure cookers or Television or for spa or haircut. Similarly, a voucher can be general purpose voucher which can be used for multiple purposes. Time of supply would be date of redemption of voucher. Example 2 :- A ₹ 1000/- voucher issued by Shoppers Stop store can be used for buying any product at any Shoppers Stop store. In case time of supply would be date of issue of voucher. Refer some following cases M/S PREMIER SALES PROMOTION PVT LIMITED. 2023 (2) TMI 130 - KARNATAKA HIGH COURT it was concluded that the vouchers traded by the Appellant are goods and not actionable claims, and the supply of vouchers by the Appellant is a supply of goods in terms of Section 7 of the CGST Act. M/S MYNTRA DESIGNS PVT. LTD. 2023 (3) TMI 107 - APPELLATE AUTHORITY FOR ADVANCE RULING, KARNATAKA it was held that input tax credit is not available on the vouchers received by the Appellant. KALYAN JEWELLERS INDIA LTD. 2021 (4) TMI 885 it was held that The time of supply of the gift vouchers / gift cards by the applicant to the customers shall be the date of issue of such vouchers and the applicable rate of tax is that applicable to that of the goods. Voucher define in Directive 2006/112/EC as amended on 27.06.2016 As per Article 30a For the purposes of this Directive, the following definitions shall apply: Voucher means an instrument where there is an obligation to accept it as consideration or part consideration for a supply of goods or services and where the goods or services to be supplied or the identities of their potential suppliers are either indicated on the instrument itself or in related documentation, including the terms and conditions of use of such instrument. Single-purpose voucher means a voucher where the place of supply of the goods or services to which the voucher relates, and the VAT due on those goods or services, are known at the time of issue of the voucher. Multi-purpose voucher means a voucher, other than a single-purpose voucher. As per Article 30b Each transfer of a single-purpose voucher made by a taxable person acting in his own name shall be regarded as a supply of the goods or services to which the voucher relates. The actual handing over of the goods or the actual provision of the services in return for a single-purpose voucher accepted as consideration or part consideration by the supplier shall not be regarded as an independent transaction. Where a transfer of a single-purpose voucher is made by a taxable person acting in the name of another taxable person, that transfer shall be regarded as a supply of the goods or services to which the voucher relates made by the other taxable person in whose name the taxable person is acting. Where the supplier of goods or services is not the taxable person who, acting in his own name, issued the single-purpose voucher, that supplier shall however be deemed to have made the supply of the goods or services related to that voucher to that taxable person. The actual handing over of the goods or the actual provision of the services in return for a multi-purpose voucher accepted as consideration or part consideration by the supplier shall be subject to VAT pursuant to Article 2, whereas each preceding transfer of that multi-purpose voucher shall not be subject to VAT. Where a transfer of a multi-purpose voucher is made by a taxable person other than the taxable person carrying out the transaction subject to VAT pursuant to the first subparagraph, any supply of services that can be identified, such as distribution or promotion services, shall be subject to VAT. Regulation by the Reserve Bank of India in respect of Voucher Before we delve into the taxability of vouchers under the GST law, it is pertinent to understand the manner in which such payment instruments are regulated in India. Payment system means a system that enables payment to be effected between a payer and a beneficiary, involving clearing, payment or settlement service or all of them, but does not include a stock exchange. Payment system includes the systems enabling credit card operations, debit card operations, smart card operations, money transfer operations or similar operations. [Section 2(1)(i) of the Payment and Settlement Systems Act, 2007] Pre-paid vouchers are regulated by the Reserve Bank of India ( RBI ) in India as Prepaid Payment Instruments ( PPI ) under the PSS Act and such instruments cannot be set up and operated by an entity without the prior approval of RBI. [RBI Circular No. RBI/DPSS/2017-18/58, dated 11th October, 2017 for master directions relating to issuance and operation of prepaid payment instruments] RBI identifies three types of PPIs Closed System PPIs, Semi-closed System PPIs and Open System PPIs i) Closed System PPIs are issued by an entity for facilitating the purchase of goods or services from that entity only and are not classified as a payment system requiring approval by the RBI. As these instruments cannot be used for payments or settlement for third party services, the issuance and operation of such instruments is not classified as payment systems requiring approval / authorisation by the RBI. ii) Semi-closed System PPIs are used for the purchase of goods or services at a group of clearly identified merchant locations / establishments, which have a specific contract with the issuer (or contract through a payment aggregator / payment gateway) to accept PPIs as payment instruments and require prior authorisation from RBI. s. These instruments do not permit cash withdrawal, irrespective of whether they are issued by banks or non-banks iii) ' Open System PPIs' These PPIs are issued only by banks and are used at any merchant for purchase of goods and services, including financial services, remittance facilities, etc. Banks issuing such PPIs shall also facilitate cash withdrawal at ATMs / Point of Sale (PoS) / Business Correspondents (BCs). PPIs in the form of gift instruments may also be issued, but such instruments are non-reloadable.