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GST: Change in Rate of Tax in Respect of Supply of Services

There are two likely scenarios that have been dealt with by section 14 of Model GST Law–1. Where Taxable Service is provided before the change in effective rate of tax 2. Where Taxable Service is provided after the change in effective rate of tax

CA Deepak Gadgil

CHANGE IN RATE OF TAX IN RESPECT OF SUPPLY OF SERVICES – SECTION 14 OF MODEL GST LAW

Background –

It has occurred many times in past that the Government makes changes in rates of tax overnight & the tax payer is left with no choice but to submit himself to these changes. However a question arises as to how & when these changes will affect him vis a vis on going transactions that take place every day. Previously there was no clarity about this major issue in the taxation laws of the country may it be state vat laws or central excise & service tax laws.

However the Government has taken care to address this major issue in the Model GST Law that is now available for public consumption. We all hope that the same provisions will be present in the Final GST Law when the same is actually enacted by the Government.

Section 14 of Model GST Law

This section starts with Non-Obstante Clause with respect to section 13 – section 13 talks about – Time of Supply of Services – as we can understand from the reading of this section the time of supply will decide the liability to pay the tax – i.e. GST.

There are two likely scenarios that have been dealt with by this section –

  • Where Taxable Service is provided before the change in effective rate of tax
  • Where Taxable Service is provided after the change in effective rate of tax

The position with respect to these scenarios is as follows –

Service Provided Date of issue Of invoice Date of Receipt of Payment Rate of Tax Applicable Basis (Time of Supply)
Before Change in Rate of Tax After change In rate After change In rate New Rate Receipt of Payment OR Issue of Invoice Whichever is earlier
Before Change in Rate of Tax Before change In rate After change In rate Old Rate Issue of Invoice
Before Change in Rate of Tax After change In rate Before change In rate Old Rate Receipt of Payment
After Change in Rate of Tax Before change In rate After change In rate New Rate Receipt of Payment
After Change in Rate of Tax Before change In rate Before change In rate Old Rate Receipt of Payment OR Issue of Invoice Whichever is earlier
After Change in Rate of Tax After change In rate Before change In rate New Rate Issue of Invoice

This position can be summarized as follows –

There are two events that will decide the taxability at old or new rate – Issue of Invoice & Receipt of Payment –

In case if the service is provided before change in rate – then if both the events i.e. Issue of Invoice & Receipt of Payment occur after the change in rate then only NEW RATE will apply

In case if the service is provided after change in rate – then if both the events i.e. Issue of Invoice & Receipt of Payment occur before the change in rate then only OLD RATE will apply.

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Bill of Supply format under GST

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