Background:

On the eve of new year, GST Council present a box full of sweets, to business entity in the form of allowing the ITC till March 2019 GSTR 3B, extend the GST Audit to 30.06.2019 etc., beside some of supplies added into list of supplies on which tax to be payable by recipient w.e.f. 01.01.2019. In this list, security services (services provided by way of supply of security personnel) by a person other than body corporate to a registered person has been included vide N/N 29/2018 – CTR, DT. 31.12.2018.

By the insertion of this entry, no. of question(s) arise about time of supply (TOS) and person who will liable to pay tax. We hereunder provide the critical analysis of section 13 of CGST Act, 2017 which deals with the time of supply.

Provision & Analysis:

Section 13(2) states that TOS of services shall be the earliest of the following dates, namely:-

a) Date of issue of invoice (if issued within period prescribed u/s 31(2), say 30 days) or the date of receipt of payment, whichever is earlier.

b) Date of provision of service (if invoice is not issued within period prescribed u/s 31(2), say 30 days) or the date of receipt of payment, whichever is earlier.

Section 13(3) states that, for supplies under RCM, TOS of services shall be the earlier of the following dates, namely:-

a) Date of Payment

b) Date immediately following sixty days from the date of issue of invoice

Hence, for determination of time of supply, the following three factors play an important role:

i) Date of provision of service (i.e. Date of completion of service)

ii) Date of issue of invoice

iii) Payment for supply

On the basis of time of supply, it can be decided that who will be liable to pay tax in scenarios where any supply of service become taxable under RCM.

Critical Analysis by illustrations:

Case 1:

a) Date of provision of service : 31.12.2018

b) Date of issue of invoice: 08.01.2019 (i.e. within 30 days)

c) Date of Payment: 15.02.2019 (within 60 days of date of issue of invoice)

TOS shall be 15.02.2019, not 08.01.2019 even invoice issued within 30 days in consonance with section 13(2) read with section 13(3). Therefore, recipient of supply shall be liable to pay tax.

Case 2:

a) Date of provision of service : 31.12.2018

b) Date of issue of invoice: 31.01.2019 (i.e. After 30 days)

c) Date of Payment: 15.02.2019 (within 60 days of date of issue of invoice)

TOS shall be 31.12.2018, not 15.02.2019 as section 13(2) complied with. Therefore, supplier of service shall be liable to pay tax.

Note:

  1. If payment has already been made on or before 31.12.2019 i.e. before supplies taxable under RCM, then supplier shall always be liable to pay tax.
  2. If payment is made after the date of issue of invoice (whether within or after 60 days), then recipient of service shall always be liable to pay tax except where the date of invoice is 31.12.2018 or in case 2 produced above.

Conclusion:

Gradually, by expanding the list of supply of services taxable under RCM, Govt. nullify the impact of section 9(4) of CGST Act, 2017 for this particular entry being security services.

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