GST on Voucher Dealings: Bombay High Court Quashes Full Turnover Demand, Orders Fresh Adjudication

Background and Overview

The Bombay High Court recently rendered a significant ruling in the matter of Neha Piyush Shah Vs Union of India, addressing a critical and long-debated question in GST law — whether dealings in vouchers by an individual or intermediary attract GST on the entire turnover or merely on the commission or fees earned through such dealings.

The adjudicating authority had confirmed a substantial GST demand of ₹12,66,19,880 along with applicable interest and penalty under Section 73 of the CGST Act, 2017, read with corresponding provisions of the MGST Act and IGST Act. The Bombay High Court, after examining the statutory framework, the relevant CBIC circular, and applicable judicial precedents, found that the impugned order required fresh consideration and accordingly quashed it to the extent of the confirmed demand, remanding the matter for de novo adjudication.

The Demand and Scope of the Writ Petition

The impugned Order-in-Original dated 26 December 2023 had confirmed the following:

"I confirm the demand of GST amounting to Rs. 12,66,19,880/- (Rupees Twelve Crore Sixty Six Lakhs Nineteen Thousand Eight Hundred and Eighty Only), under the provisions of Section 73 of CGST Act, 2017 read with corresponding section of MGST Act, 2017 and relevant sections of IGST Act, 2017, as detailed in 7.8 above along with applicable interest under section 50 of the CGST Act, 2017 on M/s. Neha Piyush Shah (Trade Name — Neoniche)."

Additionally, a penalty of ₹1,26,61,988/- was imposed under Section 73 read with Section 122(2)(a) of the CGST Act, 2017.

The petitioner — an individual operating under the trade name Neoniche — clarified at the outset that while certain other demands in the Order-in-Original were proposed to be contested through a statutory appeal, the writ petition was confined exclusively to the GST demand of ₹12,66,19,880/- confirmed on account of the difference between Profit & Loss account turnover and GST return turnover, which the petitioner attributed to voucher transactions.

What Are Vouchers Under the CGST Act?

Statutory Definition Under Section 2(118)

The foundation of the petitioner's case rested on the statutory definition of the term "voucher" as provided under Section 2(118) of the CGST Act, 2017, which reads:

"(118) "voucher" means an instrument where there is an obligation to accept it as consideration or part consideration for a supply of goods or services or both and where the goods or services or both 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."

Interplay With the Definition of "Money" Under Section 2(75)

Counsel for the petitioner further drew the Court's attention to the definition of "money" under Section 2(75) of the CGST Act, 2017:

"money" means the Indian legal tender or any foreign currency, cheque, promissory note, bill of exchange, letter of credit, draft, pay order, traveller cheque, money order, postal or electronic remittance or any other instrument recognised by the Reserve Bank of India when used as a consideration to settle an obligation or exchange with Indian legal tender of another denomination but shall not include any currency that is held for its numismatic value;"

The argument advanced was that vouchers, being instruments that facilitate the discharge of an obligation and bear characteristics similar to monetary instruments, ought not to be treated as goods liable to GST under Section 7 of the CGST Act, 2017.

The Adjudicating Authority's Position

The Revenue's adjudicating authority proceeded on the basis that dealings in vouchers constitute supply of goods within the meaning of Section 7 of the CGST Act, 2017 and accordingly imposed GST on the assessee's entire turnover.

The rationale offered in the impugned order read as follows: