Time of Supply for supply through Vending Machine

Tally Solutions | Updated on: February 5, 2020

A vending machine is an automated machine from which you can buy smaller items such as snacks, beverages, alcohol, cigarettes and lottery tickets etc. on inserting the coin or specially designed into the machine. It is a common sight in airports, shopping malls, etc. where the suppliers place the machines containing goods that can be operated by customers and without the presence of a salesperson, the machine itself can dispense the goods.

These machines are placed by the supplier, who on a frequent basis loads the stocks and collects the funds from the machine.

What will be the time of supply, if you are a VAT registered supplier supplying goods through vending machines? Is it the date on which the supply was made i.e. the date on which the goods were dispensed from that machine? Or the date of the delivery of goods (storing goods) to such machines?

The answer is 'No'.

The time of supply in case of supply through a vending machine is the date on which funds are collected by the supplier from the machine. In other words, when the supplier visits the place where such machines are located and collects the funds that have been deposited into the machine by the customer, will be the time of supply of dispensed goods.

Let us understand this with an example.

Ali Traders have placed a vending machine in a shopping mall located in Dubai. This machine dispenses snacks and beverages. On 25 March, 2018, Ali Traders stored the snacks and beverages into the machine. On 27nd, 28rd and 29th of March, 2018, goods were dispensed to the customers through vending by inserting the required coins. On 5th April, 2018, Ali Traders collects the funds from the vending machine.

Goods Stored in Vending Machine	Goods Dispensed	Funds collected from Vending Machine	Time of Supply
25th March,2018	27th, 28th and 29th of March, 2018	5th April,2018	5th April,2018

The time of supply in the above scenario will be 5th April, 2018. This is because the time of supply in the case of supplies through a vending machine, will be the date on which the funds were collected from such machines. Accordingly, the taxpayer needs to report and pay VAT for the month of April, 2018, if it is a monthly return. In case of quarterly, it should be reported for the tax period of April – June quarter or in the quarterly tax period in which April month forms part of it.

Conclusion

The above provision is rightly framed considering the cash flow impact in the absence of such a provision. The taxpayers supplying goods through vending machines should be clear about the time of supply discussed above. Any difference in determining the time of supply will impact the cashout flow by early payment of tax or by way of penalties. Also, it is very important to a keep a track of the date on which funds were collected so that the taxpayer can determine the tax period in which VAT should be paid to FTA.