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TMI BlogClarification on various issues pertaining to GST treatment of vouchersX X X X Extracts X X X X X X X X Extracts X X X X ..... ure uniformity in the implementation of the provisions of the law across field formations, the Board, in exercise of its powers conferred by section 168 (1) of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as CGST Act ), hereby clarifies the issues, as below. 3. Issue 1 -Whether transactions in vouchers falls under the category of supply of goods and/or services? 3.1 The relevant legal provisions of CGST Act, 2017 are as under: (i) Section 2(52) - goods means every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply. (ii) Section 2(102) - services means anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination to another form, currency or denomination for which a separate consideration is charged. Explanation. - For the removal of doubts, it is hereby clarified that the expression services includes facilitating or arranging transactions in securities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accept it as a consideration or part consideration for the supply of goods and/or services. The issuance of payment instruments, including pre-paid instruments, in India is regulated by Reserve Bank of India (RBI) in terms of the Payment and Settlement Act, 2007, RBI s Master Directions and the relevant Notifications/Circulars/Communications issued by the RBI from time to time. 3.3 Pre-paid instruments (PPIs) as defined by RBI are payment instruments that facilitate purchase of goods and/or services against the value stored on such instruments. The value stored on such instruments represents the value paid for by the holder, by cash, by debit to a bank account, or by credit card. The pre-paid instruments can be issued as cards, wallets and in any such form/ instrument which can be used to access the PPI and to use the amount therein. Further, as per section 2(75) of CGST Act , money includes an instrument recognized by the Reserve Bank of India which is used as a consideration to settle an obligation. 3.4 On combined reading of the definition of voucher as per section 2(118) of the CGST Act , along with definition of money as per section 2(75) of the CGST Act and the description o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be the GST treatment of transactions in vouchers by distributors/ sub-distributors/ agents etc.? 4.1 There are primarily two models for distribution of vouchers through distributors/ sub distributors/ agents, etc. (i) Where vouchers are distributed through the distributors/ sub-distributors/ dealers on Principal-to-Principal (P2P) basis. (ii) Where vouchers are distributed using agents/ distributors/ sub-distributors on commission/ fee basis. 4.2 Where vouchers are distributed through the distributors/ sub-distributors/ dealers on Principal-to-Principal(P2P) basis: In such cases, the distributor/ dealer purchases voucher from the voucher issuer typically at a discounted rate and subsequently sells the same to the sub-distributors, corporates or end customers and generate revenue through a trading margin, which is a difference between the acquisition cost and the selling price of the vouchers by the said distributor/ dealer. In such cases, distributors/ dealers (including subdistributors) own the vouchers and operate autonomously with full control over the process from purchase to the final sale of the vouchers to the end user. 4.2.1 As per section 9 (1) of CGST Act , GST is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... / unredeemed at the end of their expiry period. In such cases, the businesses generally make book adjustments and account the said amount on account of unredeemed vouchers in their statement of income. The value of such unredeemed vouchers accounted for in the statement of income is called breakage. There are ambiguities and doubts in respect of GST treatment of such breakage. Also, doubts are raised whether the amount attributed to the unredeemed voucher(breakage) can be considered as monetary value of any act or forbearance, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person . 6.2 As per section 9 (1) of the CGST Act, GST is leviable only on the supply of goods and/or services. In the case of breakage, there is no redemption of voucher and there is no supply of underlying goods and/or services. Therefore, there is no supply of goods and/or services on account of such unredeemed vouchers (breakage). Also, consideration under GST is defined under section 2 (31) of CGST Act , in relation to the supply of goods or services or both. As there is no underlying supply of goods and/or services i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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