Section 12 – Time of supply of goods- We have discussed in previous articles Taxable event – Supply and also levy and collection section 9 but now ‘Time of supply ‘means when GST to be charged ??
(1) The liability to pay tax on goods shall arise at the time of supply, as determined in accordance with the provisions of this section.
(2) 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 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:
Provided that where the supplier of taxable goods receives an amount up to one thousand rupees in excess of the amount indicated in the tax invoice, the time of supply to the extent of such excess amount shall, at the option of the said supplier, be the date of issue of invoice in respect of such excess amount.
Analysis : Time of Supply –Forward Charge
Time of supply prescribed as earlier of –
♦ date of issue of invoice or last date on which the invoice is required to be issued with respect to the supply
♦ date of receipt of payment.
Now date of receipt of payment not relevant due to Notification No. 66/2017 – Central Tax dated 15.11.2017 Seeks to exempt all taxpayers from payment of tax on advances received in case of supply of goods.
So now focus is on date of issue of invoice or last date on which the invoice is required to be issued with respect to the supply.
Here two kinds of situations need to be discussed-
i. A case where the supply involves movement of goods
ii. Any other case
Supply involves movement of goods– Where the supply involves movement of goods then an invoice must be issued at the exact time when the goods are about to be removed. Movement of goods may be caused by the supplier (or his agent or transporter) or by the recipient (or his agent or transporter).
For example– Ram in Gujarat gets an order from Mr. Sham in West Bengal on 15th March 2020 for supply of refrigerators. Mr. Ram dispatches the goods from his premises to his transporter’s premises on 20th March 2020. The transporter initiates the transportation on 22nd March 2020 and the goods finally reach the premises of Mr. Y on 26th March 2020. The removal of goods will be said to be caused on 20th March 2020 i.e. the date when the goods leave the premises of Mr. Ram. The last date of issue of invoice will also be 20th March 2020 in the given case.
Supply does not involve movement- Where the supply does not involve movement of goods then an invoice must be issued at whatever is the time when the goods are delivered or made available to the recipient.
For example-Mr. X agrees to sell his godown in Delhi to Mr. Y on 15th March 2020. There is a separate agreement entered by Mr. X and Mr. Y for the selling of furniture within the godown on 19th March 2020. Mr. X hands over the possession of the godown and the furniture on 25th March 2020. In this case, the furniture will be considered to be delivered on 25th March 2020 which will also be the last date of issue of invoice as per Section 31.
Continuous supply of goods – Now what is meaning of continuous supply of goods ?
As per Section 2(32) of the CGST Act 2017, continuous supply of goods means a supply of goods which is provided or agreed to be provided continuously or on recurrent basis, under a contract whether or not by means of wire, cable, pipeline or other conduit and for which the supplier invoices the recipient on a regular or periodic basis and includes supply of such goods as the Government may subject to such conditions as it may by notification specify.
For the purpose of continuous supply, it is necessary that successive statement of accounts or successive payments or both are involved for the purpose of determining the consideration for such supply. As per Section 31, in respect of continuous supply of goods, it has been stated that invoice should be issued before or at the time each such statement is issued or each such payment is received.
Goods sent or taken on approval for sale or return basis – As per this system, certain goods are sent to the recipient without supplying/selling the same at its outset. These goods can be examined or tested by the recipient as to whether his
requirements are fulfilled. The recipient can at his behest, approve the said supply or return the said goods. If the goods are returned, no supply will be deemed to have taken place. If the goods are approved by the recipient, then it will amount to a supply. The last date of issuance of invoice in such cases as per Section 31(7) of the CGST Act 2017 has been given as earlier of-
Capital Goods/Goods sent to Job worker without payment of tax- The intention of the law is not to tax capital goods / inputs sent to job-worker as supply since in such an arrangement the goods are received back by the principal. However, if such goods are not received back within three years and one year respectively, it would qualify as supply by way of operation of deeming fiction provided under section 143(2) and section 143(3). In such a scenario, the date of sending the goods to the job-worker would be deemed to be the date when the goods were sent to the job-worker originally.
Now let us take an example of continuous supply of goods and Goods send on approval or return basis
A cement manufacturing company generates certain waste materials which are supplied to a recycling factory through a pipeline on a continuous basis.
Example- 1 Monthly payments of Rs 200000 are made by 7th of next month as per contract , For the period October-December , following were dates of issuances of invoices and payments:
|Period||Date of issuance of invoice||Date of receipt of payment||Time of Supply|
|October||4th November 2019||6th November 2019||4th November 2019|
|November||6th December 2019||8th December 2019||6th December 2019|
|December||9th January 2020||5th January 2020||5th January 2020|
Example 2- Certain goods are sent by Mr. X on sale on approval or return basis to Mr. Y on 22nd April 2019 The supply gets confirmed and invoice is issued on:
Case 1: 20th August 2019
Case 2: 22nd November 2019
Payment in each of the cases is made on 23rd November 2019
Answer= Case 1- the confirmation of supply occurred before 6 months from the date of removal. So, the last date of issuance of invoice was 20th August 2019. On this date, the invoice was issued. So, the time of supply will be 20th August 2019.
Case 2- the confirmation of supply happened after 6 months from the date of removal. Six months expired on 21st October 2018. So, the invoice was required to be issued by this date.
(3) In case of supplies in respect of which tax is paid or liable to be paid on reverse charge basis, the time of supply shall be the earliest of the following dates, namely:—
(a) the date of the receipt of goods; or
(b) the date of payment as entered in the books of account of the recipient or the date on which the payment is debited in his bank account, whichever is earlier or
(c) the date immediately following thirty days from the date of issue of invoice or any other document, by whatever name called, in lieu thereof by the supplier:
Provided that where it is not possible to determine the time of supply under clause (a) or clause (b) or clause (c), the time of supply shall be the date of entry in the books of account of the recipient of supply.
Analysis- Where tax is payable on reverse charge basis, the time of supply is appointed to be the earliest of
(a) date of receipt of goods,
(b) date of payment or
(c) 30 days from the date of issue of invoice by the supplier.
If for any reason, one of these three dates cannot be determined then the time of supply will be the date of recording the supply in the books of the recipient. Reverse charge in case of goods may arise either under Section 9(3) or Section 9(4) of the CGST Act.
Let us understand with an example- Mr.X, an agriculturist supplies raw cotton (under reverse charge) to Mr. Y who manufactures cotton shirts. The date wise turnout of events is given below:
01.04.2019- Mr.Y approaches Mr.X and places an order for 2 tonnes of cotton
10.04.2019- Mr.Y receives the goods
15.04.2019- Mr.X issues an invoice
20.04.2019- Mr.Y makes a payment by cheque and accordingly records it in his books of accounts.
25.04.2019- The payment gets debited from Mr.Y’s bank account.
What will be the time of supply in the given case?
♦ Answer- Date of receipt of goods- e 10.04.2019
♦ the date of payment as recorded in the books of Mr.Y i.e. 20.04.2019 or the date when the payment gets debited in the books of the recipient i.e. 25.04.2019 whichever is earlier
♦ the date immediately following thirty days from the date of issue of invoice, i.e.15.04.2019+30days+1day=16.05.2019
Therefore, the time of supply will be 10.04.2019
(4) In case of supply of vouchers by a supplier, the time of supply shall be—
(a) the date of issue of voucher, if the supply is identifiable at that point; or
(b) the date of redemption of voucher, in all other cases.
(5) Where it is not possible to determine the time of supply under the provisions of subsection (2) or sub-section (3) or sub-section (4), the time of supply shall––
(a) in a case where a periodical return has to be filed, be the date on which such return is to be filed; or
(b) in any other case, be the date on which the tax is paid.
(6) The time of supply to the extent it relates to an addition in the value of supply by way of interest, late fee or penalty for delayed payment of any consideration shall be the date on which the supplier receives such addition in value.
Analysis- Now, the time of supply in the case of vouchers is stated to be:
(i) the date of issue of voucher if the supply is identifiable at that point; or
(ii) in all other instances, the date of redemption of the voucher.
What is voucher? – Voucher is therefore ‘instrument with obligation’ that is accepted as consideration. Voucher does not contain any ‘stored value’ but ‘value-to-use’. This ‘value-to-use’ is credited into a voucher by a contractual arrangement between the issuer-redeemer of the voucher. This basically means that if the exact nature of goods to be supplied along with its quantity value of such goods are available when the voucher is issued, the time of supply will be the
date of issue of voucher. On the other hand, if the natures of supply of goods are not available at the time of issue of voucher, then the time of supply will be considered as the date of redemption of voucher. This is not to say that the time of supply will determine the value also. This is because as per Rule 32(6), the value will always be the redemption or face value of the voucher irrespective of the time of supply.
|Illustration||Voucher or not||Nature of Instrument|
|Shopping gift card purchased for `5,000/-||Not voucher||It’s money, by way of ‘stored value’ even if not encashable|
|Coupons or token given to customer by pizza outlet on making purchase of `1,000/- which allows 10% discount on next purchase||Not voucher||It is future discount by way of ‘value-to-use’ not encashable|
|Transfer of liability towards accumulated loyalty points credited to customers||Voucher||Now it’s become an ‘instrument with obligation|
♦ Time of Supply – Residuary
Where none of the above provisions are able to satisfactorily answer the time of supply, it is to be determined based on the residuary provision which states that the time of supply is:
(i) where a periodical return has to be filed, the due date prescribed for such return; or
(ii) in any other case, the date of payment of the tax.
Time of supply under this residuary provision is applicable only when the other provisions are found to be inapplicable and not merely when there is some difficulty in determining the facts that are sought for by the relevant provision.
♦ Time of Supply – Special Charges
Special charges imposed for delay in payment of consideration will enjoy the facility of time of supply being date of receipt of the charges imposed, that is, cash-basis of payment of GST.
Example- Mr. X enters into a contract for supply of goods worth 4,00,000 with Mr. Y on 10th April 2019. Such goods are removed with an invoice dated 12th April 2019 on 13th April 2019 for delivery to Mr. Y. The terms of the contract demanded the payment against such supply to be made within 60 days beyond which a late payment charge of ` 10,000 will have to be paid by Mr. Y. Mr. Y makes the payment of Rs, 4,00,000 along with the late payment charges on 15th July 2019. What will be the time of supply in respect of the entire amount?
Answer– In Section 12(2), the time of supply in respect of ` 4,00,000 will be the date of issuance of invoice or last date of issuance of invoice. Last date of issuance of invoice will be the date of removal where supply involves movement of goods.
♦ Date of issuance of invoice: 12th April 2019
Last date of issuance of invoice: 13th April 2019 (date of removal) So, the time of supply will be 12th April, 2019 in respect of ` 4,00,000.
However, in respect of the time of supply for the amount of Rs, 10,000 paid as late payment charges, time of supply as per Section 12(6) has been stated to be the date on which the supplier receives the addition in value. Here, the additional amount of ` 10,000 is received on 15th July 2019. So, the time of supply for this amount will also arise on 15th July 2019.
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