TaxTMI 
TaxTMI 
TaxTMI 
Clarification on various issues pertaining to GST treatment of vouchers
X X X X Extracts X X X X
X X X X Extracts X X X X
.... formations are taking different views on these issues leading to ambiguity and litigations. 2. Accordingly, in view of the difficulties being faced by the trade and industry and to ensure uniformity in the implementation of the provisions of the law across field formations, the Chief Commissioner, in exercise of his powers conferred by section 168(1) of the Andhra Pradesh Goods and Services Tax Act, 2017 (hereinafter referred to as "APGST 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 APGST 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rvices." (viii) Schedule III to the APGST Act deals with "Activities or Transactions which shall be treated neither as a supply of Goods nor a supply of services: .... 6. Actionable claims, other than specified actionable claims. ..." 3.2 From the definition of voucher under section 2(118) of APGST Act, it emerges that "voucher" may be in nature of payment instrument which creates an obligation on the supplier to 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, wal....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e of whether voucher is covered as a pre-paid instrument recognized by RBI or not, the voucher is just an instrument which creates an obligation on the supplier to accept it as consideration or part consideration and the transactions in voucher themselves cannot be considered either as a supply of goods or as a supply of services. However, supply of underlying goods and/or services, for which vouchers are used as consideration or part consideration, may be taxable under GST. Issue 2 -What 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 discou....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... or any other amount, by whatever name called, as per contract/agreement between such service provider and the service recipient (voucher issuer). In such a case, the said service fee/ service charge/ affiliate charge or other amount for supply of such additional services to the voucher issuer as per the terms of contract/agreement, would be liable to GST at the applicable rate in the hands of the said service provider. Issue 4 - What would be the GST treatment of unredeemed vouchers (breakage). 6.1 Sometimes, vouchers remain unused/ 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 recipien....