Time of Supply of Services - Voucher - GST Ready Reckoner - GST

Time of Supply of Services - 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 as per GST Act. Section 13 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 services under section 31 of CGST Act 2017 The criteria to determine the time of supply of services depend upon whether the invoice is issued within the time prescribed under section 31. The tax invoice needs to be issued either before the provision of service or within 30 days (45 days in case of insurance companies/ banking companies/ financial institutions including NBFCs) from the date of supply of service. [ section 31(2) read with rule 47 of CGST Rules ]. In case of insurance companies/ banking companies/ financial institutions including NBFCs/ telecom companies/ notified supplier of services making taxable supplies between distinct persons as specified in section 25, invoice may be issued before or at the time of recording such supply in the books of account or before the expiry of the quarter during which the supply was made [ Second proviso to rule 47 ]. In case of continuous supply of services , the invoice should be issued either (i) on/ before the due date of payment or [ Due date of payment is Known ] (ii) before/ at the time when the supplier of service receives the payment, if the due date of payment is not known (iii) on/ before the date of completion of the milestone event when the payment is linked to completion of an event [Section 31(5)]. Continuous supply of services are provided, or agreed to be provided, continuously or on recurrent basis, under a contract, for a period exceeding 3 months with periodic payment obligations and includes supply of such services as the Government may notify. In case of cessation of supply of services before completion of supply, the invoice (to the extent of the supply made before such cessation) should be issued at the time when the supply ceases [Section 31(6)]. Time of supply of Vouchers exchangeable for services, [ Section 13(4) of CGST Act 2017 ] Vouchers 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. In case of supply of vouchers the time of supply is- If supply is identifiable then Date of issue of voucher. If supply is not identifiable then Date of redemption of voucher. Examples: - Time of supply is different in the case of general-purpose voucher and in case of single purpose voucher. 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. (General purpose Voucher) Example 2:- A ₹1,000/- voucher issued by Shoppers Stop store can be used for buying any product at any Shoppers Stop store. (Single purpose voucher) Refer some following cases M/S PREMIER SALES PROMOTION PVT LIMITED. 2023 (2) TMI 130 - KARNATAKA HIGH COURT M/S MYNTRA DESIGNS PVT. LTD. 2023 (3) TMI 107 - APPELLATE AUTHORITY FOR ADVANCE RULING, KARNATAKA KALYAN JEWELLERS INDIA LTD. 2021 (4) TMI 885 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' 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.