Engineering @Zeta

Maintaining an account of some value and supporting debits and credits on that account is an elementary exercise that a computer science student picks up in a Database course. Hundreds of accounting systems have been built across the world with about as many different implementations of these basic rules, and a proposal for a brand new accounting system could be considered as reinventing the wheel. But new accounting systems were built — Bitcoin, dozens of Altcoins, interbank distributed ledger systems like Ripple — achieving the same purpose of maintaining a ledger of accounts, but in fundamentally different ways. Across the three different systems of Bitcoin, Ripple and an Islamic Accounting System, the definitions of a ledger, a transaction and the transaction rules have very little in common. Their governing principles are so distinct that they needed fundamentally different systems.

Compliance with unique laws and regulations demand unique software systems.

The Meal Vouchers as defined in the Income Tax Act Rules, 1962 and the various prevalent interpretations of the same led us to build a one of its kind system to hold funds and enable transactions. The prevalent rules state that an organisation can provide tax benefit on an employee’s meal expenses if and only if the value is provided in the form a ‘paid voucher’. Such a voucher should also be non-transferable and only a fixed value of Rs. 50 per meal may be given.

At Zeta, one of our objectives is to eliminate paper transactions. We’ve tried to identify an available electronic system that can adhere to the requirements of Income Tax Rules for Meal Vouchers. We investigated stored value electronic cards like Smart/Chip Cards and NFC Cards, conventional mobile wallets, prepaid and core banking systems and the cards backed by such systems, and concluded that none of them could comply with any acceptable definition of  a ‘voucher’. None of these systems hold value in discrete units of Rs. 50 each, like how a paper voucher can hold. Interpretations that an electronic payment card complies with the definition of the voucher in the Income Tax Rules have been vehemently contested and a majority of reputed auditors have taken a position to the contrary. The Income Tax Rules published in 2009 have solidified the distinction between voucher and an electronic payment card by providing different set of rules for electronic cards from that of vouchers. The current rules do not even recognise electronic cards. If electronic cards do not meet the requirements of a meal voucher then any other traditional mobile wallet or NFC card will also not meet those requirements as the principles of accounting and transactions are the same among all the systems. From our discussions with several auditors and compliance officers of various companies, we learned that they want a real paper voucher like solution to meet this requirement. So we compiled all the laws defining and governing electronic documents, negotiable instruments and payment systems in India and created a Digital Voucher system that forms a crucial building block of the solution that complies with Income Tax Rules.

Any of the general, legal, wikipedia and other dictionaries define Voucher as a written document with a certain value that can be exchanged for goods or services. To digitise a written document and to provide the credibility offered by a signature while being compliant with the definition of written document, we had to rely on Electronic Documents and Digital Signature definitions as specified in Information Technology Act 2000. To define an instrument that can represent a promise of certain value, we had to consult Negotiable Instrument Act (Amendment) 2015. To define a method of exchange of such documents and to issue documents representing a value, we had to refer to Payment and Settlement System Act, 2007 and the Guidelines to Issue Prepaid Instruments published by Reserve Bank of India.  

By drawing from all the relevant laws of India, we created a Digital Voucher – a digitally signed, electronic document bearing a unique identifier and representing a specific value in Indian Rupees, issued by a Bank to a beneficiary unambiguously identified through a phone number, email address or any other such reliable, unique identifier.

We have built a system that mints Digital Vouchers on demand, using hardware security modules to create secure digital signatures as defined by Certifying Authority of India. We built a wallet that can hold these vouchers of a beneficiary. We developed a transaction system that can transfer vouchers from a beneficiary’s wallet to that of a merchant’s after due authentication and authorisation in compliance with the Reserve Bank of India’s guidelines. We created a settlement system that can interoperate with IMPS and NEFT systems of NPCI and also with card associations like MasterCard.

Using this unique system of Digital Vouchers, we built a Meal Voucher system wherein no voucher issued is more than Rs. 50 each and is non-transferable. We added multiple subsystems which identify the nature of the business of the merchant involved in a transaction and to disallow a meal voucher transaction if the merchant is not a recognised food seller. We built a system to allow full and partial refunds that work with vouchers. As the network connectivity proved unreliable even in the metros of the country, we also devised a mechanism to enable offline transactions using these vouchers.

These unique characteristics of our system make our Digital Vouchers as usable as paper vouchers:

• Without Internet Connectivity
• Without Power
• Without Smart Devices
• Without a steep learning curve

In addition to retaining the advantages of the paper, our system provides compliance controls that are unimaginable with paper – the details of the beneficiary of a voucher are embedded at the time of creation of voucher, in every transaction the beneficiary is authenticated with multiple factors or the vouchers can’t leave the user’s wallet. Thus making our vouchers non-transferable, mitigating one of the major weakness of paper vouchers. 

To summarise, Zeta Meal Vouchers are digital vouchers generated per each employee and are immutable and non-transferable. Each voucher bears value of Rs. 50 or less per meal. Vouchers are distributed to employee’s wallet on the cloud.  Employee can access and use them for food through Mobile App, Super Card, Super Tags and other means after due authentication.

We made the entire system completely configurable per company. Companies can choose if the usage of the meal vouchers have to be restricted to specific vendors in their office, vendors they have tie-ups with, vendors Zeta has tie-ups with, merchants recognised as food sellers on card networks, Zeta certified food sellers or all recognised food sellers or any combination there-of. Companies can restrict the days and time during which the meal vouchers should be usable, maximum value of the transaction permissible and how to treat the unutilised funds in the meal vouchers at the end of the financial year. That is, we have given all possible levers and knobs for the companies to define the system as per their policy. Better yet, the system can interoperate with several payroll softwares and the value of meal vouchers to be disbursed in any given month can be computed and administered seamlessly.

Each of the subsystems like Minting, Wallet, Transaction Processing, Core Accounting system, Card Network Gateway, Merchant Curation, etc., that compose our Digital Voucher System deserve an exclusive post each to discuss the unique advantages they bring and the deviations we had to make from traditional approaches to achieve them.   

NOTE: Voucher is only a foundational element in compliance with the Income Tax Rules, 1962 Section 3 (7) (viii). We don’t intend to favor any interpretation of the rule over others. Our objective is to provide all the necessary ingredients to companies to compose a solution as per their policies. Over 200 companies have chosen to use this solution with at least 2 dozen unique policies that are different in many important ways.