The term SUPPLY is the cornerstone of the GST Law. Tax is chargeable under GST only if there is Supply of Goods or Services. However the liability to pay GST arises only when the taxable event i.e. SUPPLY occurs, which is determined by Time of Supply as per Sections 12 to 14 of the GST Act. Section 12 deals with Time of Supply of Goods and Section 13 deals with Time of Supply of Services.
As per Section 12 of the GST Act, The time of supply of goods shall be the earlier of the following dates, namely:—
(a) the date of issue of invoice by the supplier or the last date on which he is required, under sub-section (1) of section 31, to issue the invoice with respect to the supply; or
(b) the date on which the supplier receives the payment with respect to the supply.
Thus GST on Supply of Goods was payable at time of receipt of advance, if the amount is received before issue of invoice. This provision was creating complications for Businesses in general and small enterprises in particular. To remove the complexities and with a move towards simplification, the Central Government issued Notification No. 40/2017 – Central Tax, dated 13/10/2017, giving relief to small businesses. As per this Notification, Registered Persons (other than composition dealers) whose turnover during last FY was less than 1.5 crore, are not required to pay GST on outward supply of goods, at time of receipt of advance.
Giving further relief the Central Government issued Notification No. 66/2017 – Central Tax, dated 15/11/2017, and extended the benefit to all taxable persons (other than Composition dealers). Now all taxable persons are required to pay GST on outward supply of Goods at time of issue of invoice or the last date on which they are required to issue the Invoice.
Implications of the recent changes
1. GST will not be payable at time of receipt of advance in case of outward supply of goods by registered persons having turnover less than 1.50 Crore during last FY, w.e.f. 13th October 2017. However GST on advance is payable if advance received during period 01/07/2017 to 12/10/2017.
2. In case of Persons having turnover more than 1.50 crore during last FY, GST is payable on advance received on outward supply of Goods, if advance is received during the period 01/07/2017 to 14/11/2017. No GST is payable on advance if it is received on or after 15/11/2017.
3. This relief is not available on outward supply of services. GST is payable on advance received in case of outward supply of services.
4. This relief is not available if tax is payable on reverse charge. In case of reverse charge, GST will be payable at time of payment, if payment is made before receipt of goods
DISCLAIMER: The contents of this article have been prepared on the basis of the relevant provisions and as per the information existing as on 28/11/2017. The views of the author are personal and cannot be relied upon before any authority, without the written permission of the author. The article is meant for general guidance and the author disclaims any liability for any loss arising to any person acting or refraining from acting on the basis of any material contained in this article. It is recommended that professional advice be sought based on specific facts and circumstances.
(Author: CA. Mohit Gaba, N.K.GABA & Co. Chartered Accountants. The author can be reached at firstname.lastname@example.org, M: +919872473334)