Introduction 

On 14th September 2022, the government submitted an amendment bill to the existing Goods and Service Tax Act (Law No. 10/2011) (the “GST Act”) to the People’s Majlis. The Government in its submission, stated that the purpose of the amendment bill is to increase the Government revenue to accommodate the recurrent expenses.
The key changes proposed in the amendment bill are to;

The amendment bill was passed by the Parliament on 16th November 2022 and was ratified by the President and published in the Government Gazette on 22nd November 2022 (the “Sixth Amendment”). 

Tourism GST 

The current GST Act requires operators of a tourist resort, tourist hotel, guest houses, picnic islands, tourist vessels and yacht marinas to be registered under the Tourism GST sector. The Sixth Amendment extends this definition by including the most recently introduced tourist establishments via amendments to the Maldives Tourism Act (Law No. 2/99). These include, integrated tourist resorts, hotels, private islands and any such facility as businesses required to be registered for Tourism GST. 

Changes to GST standard rate

Standard GST rates applicable to both Tourism GST sector and General GST sector was increased for goods and services provided on or after 1 January 2023. 

The MIRA has issued a public circular on 22nd November 2022, stating that for transactions whose "time of supply" occurs on or after 1st January 2023, the increased rate should be applicable. 

The following section of this memo briefly discusses the concept of "time of supply" and addresses frequently asked questions on this subject. 

Time of Supply 

The concept of "time of supply" was established in Section 17 of the GST Act. Simply put, time of supply is the earlier of either: 

1. the time at which a tax invoice is issued for a good or service; or
2. the time at which the recipient of the goods or service makes full or partial payment.

A pro-forma invoice is not considered as a tax invoice and issuance of a pro-forma invoice will not trigger the time of supply.

The GST Regulation (No. 2011/R-43) further requires all GST registered persons to issue a tax invoice or receipt within 3 days of supply of the goods (in case of goods) or within 3 days of completion of the service (in case of services). Where a registered person fails to issue a tax invoice or receipt within 3 days, it would be deemed that a tax invoice or receipt was issued on the 3rd day.

Example 1 - General rule on time of supply

Company A sold goods worth USD 3,000 to Company B on 30th December 2022 and the tax invoice was issued on the same day. Company B settled the invoice on 2nd January 2023. Assume that Company A is registered for GST at the General GST sector. In this case, the time of supply of this transaction is 30th December 2022 and GST is applicable to the transaction at the rate of 6%.

The GST Act and GST Regulation further instructs "Time of Supply" for the following type of transactions. 

1. Time of supply where the consideration of the goods or service is received under an installment agreement; 
2. Time of supply where the consideration of the goods or service is received through a voucher; 
3. Time of supply where the consideration of the goods or services is received through a loyalty scheme; and 
4. Time of supply where an advance payment is received for the goods and service. 

Time of supply where consideration is received via an installment agreement

Where the payment for a good or service is settled under an installment agreement, each installment will be regarded as a separate taxable transaction. the "time of supply" will be the earlier of the time on which the installment payment was received, or the time the installment payment would otherwise fall.

Time of supply where consideration is received via a voucher

Time of supply for these transactions occur when a customer receives or buys the voucher from the supplier.

If the consideration is redemption of a voucher or other such thing, the time of supply of goods and services obtained by redeeming the voucher would be the time of supply of the voucher or other such thing.

Time of supply where consideration is received via a loyalty program

Where a person settled for goods and services through redemption of loyalty points earned, the time of supply of such transaction is the date on which the loyalty points are redeemed.

Time of supply where an advance payment is received

If an advance payment or non-refundable deposit is received before the issuance of a tax invoice for the goods and services supplied, the time of supply of this transaction will be the receipt date of the advance payment or deposit.

Frequently Asked Questions

The following section discusses frequently asked questions in relation to goods and services in the tourism sector.

1. What rate should be applied for advance bookings made for arrivals on or after 1st January 2023?

A mentioned above, the applicable GST rate is determined by the date on which the time of supply for that transaction arose. Assume that the guest made an advance booking on 30th November 2022. The resort issued a pro-forma invoice of USD 10,000 on the same date. The guest plans to visit the Maldives on 3rd January 2023 and depart on 6th January 2023 and the resort issues tax invoices for all guests on the departure date.

The guest makes the full payment of USD 10,000 on 10th December 2022.

In this example, since the pro-forma invoice is not considered as a tax invoice, issuance of the pro-forma invoice on 30th November 2022 will not trigger the time of supply for the transaction. The payment for the pro-forma invoice was received on 10th December 2022 and the tax invoice for the transaction was issued on 6th January 2023.

Hence, the time of supply of this transaction is the payment date and the applicable GST rate for the payment of USD 10,000 will be the GST rate of 12%. 

2. What happens if the guest has settled part payment of the pro-forma invoice issued before 1st January 2023?

For example, a guest made an advance booking on 30th November 2022. The resort issued a pro-forma invoice of USD 10,000 on the same date. The guest plans to visit the Maldives on 3rd January 2023 and depart on 6th January 2023 and the resort issues tax invoices for all guests on the departure date. 

The guest makes a partial payment of USD 7,000 on 25th December 2022 and the balance payment of USD 3,000 was made on 2nd January 2023. 

In this example, since the pro-forma invoice was not considered as a tax invoice, issuance of the proforma invoice on 30th November 2022 will not trigger the time of supply for the transaction. The payment for the pro-forma invoice was received in two installments. One was paid on 25th December 2022 and the balance was settled on 2nd January 2023 and the tax invoice for the transaction was issued on 6th January 2023. 

Hence, the time of supply of this transaction and the applicable GST rates would be as follows: 

• GST at the rate of 12% for the advance payment of USD 7,000 received on 25th December 2022 
• GST at the rate of 16% for the balance payment of USD 3,000 received on 2nd January 2023. 

3. What happens if the guest makes an advance booking and payment is settled on or after 1st January 2023?

Assume a guest makes a booking on 25th December 2022 for a stay from 7th January 2023 to 15th January 2023. The resort issues a pro-forma invoice of USD 20,000 on 25th December 2022. The guest makes the advance payment on 5th January 2023 and the resort issues the tax invoice to them on departure, 15th January 2023.

In this example, the pro-forma invoice will not be considered as a tax invoice, hence the issuance of a pro-forma invoice will not trigger the time of supply of the transaction.

The time of supply for the transaction will be 5th January 2023 as this is the earlier date from the payment date and the tax invoice date, hence the whole transaction is applicable for GST at the rate of 16%.

4. Which rate should be applied to tourists who arrived in 2022 and departed in 2023?

A guest arrives at a tourist resort on 27th December 2022 and departs on 5th January 2023. The resort policy is to invoice for accommodation and transfer on arrival and invoice for extra consumptions such as spa, restaurants and dive center on departure. 

Resort issued a tax invoice for a total of USD 30,000 on 27th December 2022 which includes accommodation for the entire stay and the transportation charges to and from the resort to the Velana International Airport. Payment for the same was settled by the guest on 27th December 2022. 

Apart from this, on departure, the guest had accumulated extra consumption of USD 20,000 which was billed to the guest on 5th January 2023. This accumulated balance includes consumption in 2022 and 2023. 

With respect to the first transaction of USD 30,000 which was billed by the resort on 27th December 2022 and the payment was collected on the same date, the time of supply will be 27th December 2022 and the applicable GST rate for the while payment would be 12%. 

For the second transaction, where the invoice was issued on departure (5th January 2023) for the extra consumption, the following rates would apply; 

• GST at the rate of 12% for the services consumed on 27th and 28th December 2022 as the resort is required to issue a tax invoice within 3 days of providing the goods and service, and the services consumed on 27th and 28th December 2022, the resort must issue a tax invoice by 30th December and 31st December respectively. 
• GST at the rate of 16% for the balance (that is services consumed on 29th December 2022 till 5th January 2023) as the tax invoice and the payment for this was received on 5th January 2023. 

However, where the guest makes payment for each extra consumption on the date of consumption itself, then the applicable GST rate for the services which was consumed in 2022 will be 12% and the services which was consumed on or after 1 January 2023 will be 16%.