Change in rate of Tax
In the recent 47th GST Council Meet, various revisions in the rate of tax and services have been recommended and notified. The prescribed change in rates will be effective from 18th July 2022. Read: Recommendations of 47th GST Council Meeting
Provisions of time of supply of goods or services are governed by section 12 and 13 respectively, however, in case of change in rate, provisions of time of supply will be governed by section 14 of CGST Act, 2017. Before going on the provisions under section 14, it is important to understand meaning of few relevant terms:
The rate of tax depends on occurrence of 3 events:
- Supply of Goods and/or Services have been provided
- Issuance of Invoice
- Date of receipt of payment
1. Supply of Goods have been provided shall mean the risk and rewards with respect to the said goods have been transferred. (Not given in the act)
2. Supply of services have been provided shall mean the recipient has actually received the services. (Not given in the act)
3. Issuance of Invoice shall mean an invoice issued as per the provisions of section 31
4. Date of receipt of payment shall be the date on which the payment is entered in the books of account of the supplier or the date on which the payment is credited to his bank account, whichever is earlier. Provided that the date of receipt of payment shall be the date of credit in the bank account if such credit in the bank account is after four working days from the date of change in the rate of tax.
For example: The rate of tax on hotel rooms under Rs. 1000 was exempt earlier and the same shall be chargeable with 12% rate of tax from 18th July 2022, The service has been supplied on 17th July 2022 and payment with respect to same has been received via cheque on the same date and the invoice will be issued once the amount gets credited into the bank account of the hotel. Now,
- If the cheque gets credited into the bank account on the hotel till 21st July 2022, the said service shall be exempt
- If the cheque gets credited into the bank account on the hotel after 21st July 2022, the said service shall be taxable at the rate of 12% (as per the new rate of tax)
The provisions of section 14 can be compiled in two tables:
In case the goods or services or both have been supplied before the change in rate of tax:
| S. No. | Date of receipt of payment | Invoice Issued | Time of supply | Conclusion – Rate of Tax |
| 1. | After change in rate of tax | After change in rate of tax | Date of receipt of payment or the date of issue of invoice, whichever is earlier; | New |
| 2. | Before change in rate of tax | After change in rate of tax | Date of receipt of payment | Old |
| 3. | After change in rate of tax | Before change in rate of tax | Date of issue of invoice. | Old |
In case the goods or services or both have been supplied after the change in rate of tax:
| S. No. | Date of receipt of payment | Invoice Issued | Time of supply | Conclusion – Rate of Tax |
| 1. | Before change in rate of tax | Before change in rate of tax | Date of receipt of payment or the date of issue of invoice, whichever is earlier; | Old |
| 2. | After change in rate of tax | Before change in rate of tax | Date of receipt of payment | New |
| 3. | Before change in rate of tax | After change in rate of tax | Date of issue of invoice. | New |
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