CA Nihalchand Jain
TIME OF SUPPLY UNDER GST
Introduction:
Time of supply (Also referred as “TOS” at many places) is when you commit to the government, that a certain amount is your gross. As this becomes the starting point of your calculation, it gains extreme importance. We all know that late discharge of liability results into extra money outflow in form of interest. Earlier, the government authorities were demanding interest on “Gross Liability” with an argument that unless the amount of ITC is not debited from Electronic Credit Ledger, it cannot be said that it is received by the government. With this issue looking settled owing to multiple AARs and Councils decision, we can say that TOS needs to decided timely in order to save additional outflows, etc.
Sections Covered:
The sections which deal with the time of supply are as follows:
Section 12 of the CGST Act, 2017 – Time of supply of goods
Section 13 of the CGST Act, 2017 – Time of supply of services
Section 14 of the CGST Act, 2017 – Change in rate of tax in respect of supply of goods or services
Section 148: Special procedure for certain processes
Section-wise discussion:
GOODS – SECTION 12
PART A – SPECIFICALLY RELATED TO GOODS
Section 12(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.
Section 12(2):Provision in case of Forward Charge Mechanism
Tax payer category A – For registered persons not paying tax under section 10 i.e. composition levy
| EARLIER OF:
1. Date of issue of invoice 2. Last date on which he is required to issue invoice u/s 31 |
The above position is post application of Notification No. 66/2017 – Central Tax dated 15th November 2017 which states that supplier of goods who did not opt for the composition levy under section 10 shall pay tax at the TOS specified in Sec 12(2)(a), which is reproduced above.
Proviso to Sec 12(2) – Application of this proviso is optional, the supplier may choose not to follow it.
Where the supplier of taxable goods receives an amount up to ₹ 1,000/- in excess of the amount indicated in the tax invoice, the time of supply to the extent of such excess shall, at the option of the said supplier, be the date of issue of invoice.
Example of Proviso when supplier chooses to opt for it:
Original Invoice dated 05/06/2019 – ₹ 1,500/-
Payment made on 28/06/2019 – ₹ 2,000/-
Excess payment – ₹ 500/-
Next Invoice made on 05/07/2019 – This the date of Invoice of excess ₹ 500/- received on 28/06/2019
Explanation (1) to Section 12(2)
For the purposes of above, the supply shall be deemed to have been made to the extent it is covered by the invoice. or, as the case maybe, the payment. (Strike off is the application of the above notification)
Applying the explanation to the example of proviso, value of supply – ₹ 1,500/-
Tax payer category B – For registered persons paying tax under section 10 i.e. composition levy
| EARLIEST OF:
1. Date of issue of invoice 2. Last date on which he is required to issue invoice u/s 31 (Regarding Issue of Invoice) 3. Date on which the payment is entered in his books 4. Date on which the payment is credited to his bank account (Regarding Payment) The above is a combined reading of Section 12(2)(a) and Explanation (ii) to Section 12(2). Explanation (ii) to Section 12(2) specifies the meaning to Date of Payment. |
Section 12(3): Provision in case of Reverse Charge Mechanism
| EARLIEST OF:
1. Date of receipt of goods 2. Date of payment as entered in the books of account of recipient 3. Date on which payment is debited in the bank account 4. 31st day from the date of issue of invoice |
Proviso to Section 12(3)
Where it is not possible to determine the time of supply as above, the time of supply shall be the date of entry in the books of account of the recipient of supply.
SERVICES – SECTION 12
PART A – SPECIFICALLY RELATED TO SERVICES
Section 13(1):
The liability to pay tax on services shall arise at the time of supply, as determined in accordance with the provisions of this section.
Section 13(2): Provision in case of Forward Charge Mechanism
| Invoice issued timely | Invoice NOT issued timely |
| EARLIEST OF:
1. Date of issue of invoice 2. Date on which the payment is entered in the books of account of the supplier 3. Date on which the payment is credited to his bank account |
EARLIEST OF:
1. Date of provision of service 2. Date on which the payment is entered in the books of account of the supplier 3. Date on which the payment is credited to his bank account |
Section 13(2)(c)
In cases where time of supply cannot be determined as per above, time of supply is the date on which the recipient shows the receipt of services in his books of account
Example of the above – Pursuant to an investigation, records pertaining Invoicing or Payment related to a particular supply could not be retrieved from the supplier. In such cases, TOS would be the date when the recipient has accounted the supplies in his books.
Proviso as discussed for Section 12(2) is equally applicable for Sec 13(2)
Explanation (i) to Section 13(2)
For the purposes of above, the supply shall be deemed to have been made to the extent it is covered by the invoice or payment.
Section 13(3): Provision in case of Reverse Charge Mechanism
| EARLIEST OF:
1. Date of payment as entered in the books of account of the recipient 2. Date on which the payment is debited in his bank account. 3. 61st day from the date of issue of invoice |
Proviso to Section 13(3)
Where it is not possible to determine the time of supply as above, the time of supply shall be the date of entry in the books of account of the recipient of supply.
In case of supply by associated enterprises
| EARLIER OF:
1. Date of entry in the books of account of the recipient of supply 2. Date of payment |
Meaning of Associated enterprises
As per Section 2(12), the “associated enterprises” shall have the meaning assigned to it in Section 92A of the Income Tax Act, 1961
GOODS AND SERVICES – SECTION 12 AND SECTION 13
PART B – SAME PROVISIONS FOR BOTH GOODS AND SERVICES
Provision in case of Supply of Vouchers
Section 12(4): Voucher for Goods/ Section 13(4): Voucher for Services
Definition of Voucher –
As per section 2(118) of the CGST Act, “voucher” means an instrument where there is an obligation to accept it as consideration or part consideration for a supply of goods or services or both and where the goods or services or both to be supplied or the identities of their potential suppliers are either indicated on the instrument itself or in related documentation, including the terms and conditions of use of such instrument.
Example of what can be Voucher – ₹. 1,000/- shoppers stop gift card which will enable the card holder to buy items available at any shoppers stop outlet.
| TOS – Date of issue of Voucher – If supply is identifiable
TOS – Date of Redemption of Voucher – If supply is not identifiable |
Examples of Section 12(4)/13(4):
Supply is identifiable:
You receive a Domino’s pizza voucher worth ₹. 1,000. In this case, since using the voucher can be used only for Pizza, supply is identifiable and time of supply would be the date of issue of Voucher.
Supply is not identifiable:
You receive a Flipkart gift voucher worth ₹. 1,000, at the time of issue of issue of that voucher, Flipkart does not know the nature of supply the voucher holder will order from Flipkart. Hence time of supply is the date of redemption.
Provision in case your supplies are not covered as per above provision
Section 12(5): Residual for Goods/ Section 13(5): Residual for Services
| Not covered u/s 12(1) to 12(4)/13(2) to 13(4)
TOS – Due Date of Return – If return is required to be filed TOS – Date of Payment of Tax – All other cases |
Provision for Items which deserve a special mention
Section 12(6): Special Items for Goods/ Section 13(6): Special Items for Services
| Items Covered – Addition in the value of supply by way of Interest/Late Fee/Penalty for delayed payment of consideration
TOS – Date of Receipt by the supplier |
Application of Section 12(6)/13(6):
Mr. A and Mr. B enter into contract that Mr. A will make supplies to Mr. B worth ₹. 1,000. Mr. B will pay value of supplies and tax thereon within 30 days from the date of receipt of goods. If Mr. B fails to make payment within 30 days, Mr. B will be liable to pay simple interest @ 20% from 31st day till the date of actual payment.
Scenario 1: Mr. B makes the payment along with tax on 29th day
Scenario 2: Mr. B makes the payment along with tax, interest on 62nd day.
Scenario 3: Mr. B makes the payment along with tax on 62nd day.
Applying section 12(6)/13(6),
Scenario 1:
Since Mr. B has made payment within the allowed timeframe, no interest would be charged on Mr. B and hence this sub-section is not attracted.
Scenario 2:
Since Mr. B has breached the time limit for payment as per contract, he will be charged simple interest @ 20% from 31st day to 62nd day i.e. till the date of actual payment. In this case, Mr. A receives something more in form of interest due to delayed payment of consideration. The time of supply with respect to this extra receipt is the date on which supplier actually receives such interest. Hence it is taxable on actual receipt basis.
In our scenario, it would be taxable on the 62nd day.
Scenario 3:
In this case, though Mr. B has made delayed payment, this sub-section is not attracted because no interest is paid by him to Mr. A
Section 14: Change in Rate of Tax
This section does not specify how to determine the time of supply; it only guides us to determine the correct rate of tax in case where there is a change in rate of tax on supplies.
Let us understand the situation which attracts this section with the help of an example:
Rate up to 30/06/2019 is 18%, Rate from 01/07/2019 is 12%, supply is made on 28/06/2019 and Invoice is raised on 03/07/2019. The rate of tax on invoice should be 18% or 12%?
Section 14 helps us to determine the applicable rate of tax.
Meaning of words used in both the Tables below
1. Before means Before the change in rate of tax
2. After means After the change in rate of tax
Reading of table – Invoice issued After is to be read as “Invoice is issued after the change in rate of tax”
| SEC 14(a) – GOODS OR SERVICES ARE SUPPLIED BEFORE THE CHANGE IN RATE OF TAX | |||
| Sr. No | Invoice issued | Payment received | Rule Applicable |
| 1 | After | After | EARLIER OF
1. Date of receipt of payment 2. Date of issue of invoice |
| 2 | Before | After | Date of issue of invoice |
| 3 | After | Before | Date of receipt of payment |
–
|
EXAMPLE OF ABOVE TABLE Supply Date – 05/06/2019; Old Rate of tax – 18% New Rate – 12%; Effective Date – 06/06/2019 |
|||
| Sr. No | Invoice issued | Payment received | Rule Applicable |
| 1 | 06/06/2019
(12%) |
19/06/2019
(12%) |
EARLIER OF
Date of receipt of payment – 19/06/2019 (12%) Date of issue of invoice – 06/06/2019 (12%) Rate Applicable – 12% |
| 2 | 05/06/2019
(18%) |
19/06/2019
(12%) |
Date of issue of invoice – 05/06/2019 – 18% |
| 3 | 06/06/2019
(12%) |
01/06/2019
(18%) |
Date of receipt of payment – 01/06/2019 – 18% |
–
|
SEC 14(b) – GOODS OR SERVICES ARE SUPPLIED AFTER THE CHANGE IN RATE OF TAX |
|||
| Sr. No | Invoice issued | Payment received | Rule Applicable |
| 1 | Before | Before | EARLIER OF
1. Date of receipt of payment 2. Date of issue of invoice |
| 2 | Before | After | Date of receipt of payment |
| 3 | After | Before | Date of issue of invoice |
Reading of table – Payment received Before is to be read as “Payment is received before the change in rate of tax”
|
EXAMPLE OF ABOVE TABLE Supply Date – 07/06/2019; Old Rate of tax – 18% New Rate – 12%; Effective Date – 06/06/2019 |
|||
| Sr. No | Invoice issued | Payment received | Rule Applicable |
| 1 | 05/06/2019
(18%) |
03/06/2019
(18%) |
EARLIER OF
Date of receipt of payment – 03/06/2019 (18%) Date of issue of invoice – 05/06/2019 (18%) Rate Applicable – 18% |
| 2 | 05/06/2019
(18%) |
19/06/2019
(12%) |
Date of receipt of payment – 19/06/2019 – 12% |
| 3 | 15/06/2019
(12%) |
05/06/2019
(18%) |
Date of issue of invoice – 15/06/2019 – 12% |
Proviso to Section 14(b):
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.
| Sr. No. | Date of entry in Books | Date of Credit in Bank | Date of Receipt of Payment |
| 1. | 05/06/2019 | 08/06/2019 | 05/06/2019 |
| 2. | 05/06/2019 | 10/06/2019 | 10/06/2019 |
| 3. | 05/06/2019 | 10/06/2019
(Assuming 08/06/2019& 09/06/2019 were holidays) |
05/06/2019 |
Explanation (1) to Section 14:
Date of Receipt of Payment:
EARLIER OF
1. Date on which the payment is entered in the books of account of the supplier.
2. The date on which the payment is credited to his bank account.
Section 148: Special procedure for certain processes.
The Government may, on the recommendations of the Council, and subject to such conditions and safeguards as may be prescribed, notify certain classes of registered persons, and the special procedures to be followed by such persons including those with regard to registration, furnishing of return, payment of tax and administration of such persons.
Using their powers under section 148, the government has specified a special procedure for payment of tax in case of Joint Development Agreements (JDA) in Real Estate Sector vide Notification No. 4/2018 – Central Tax (Rate) dated 25th January 2018 and Notification No. 4/2018 – Integrated Tax (Rate) dated 25th January 2018.
The above notifications are summarized as under:
Supply – Construction service of complex, building or civil structure
Persons liable to pay tax as per this notification
1. Registered persons who supplies development rights to a developer, builder, etc. and
2. Registered persons who supplies construction service (Developer/Builder, etc.)
Time of supply
It shall arise at the time when the said developer, builder, construction company or any other registered person, transfers possession or the right in the constructed complex, building or civil structure, to the person supplying the development rights by entering into a conveyance deed or similar instrument (for example allotment letter).
Example showing Application of the notification
Mr. J enters into a joint development agreement with PQ Builders Pvt Ltd on 5th June 2018 whereby the development right of the plot of land owned by Mr. J is transferred to PQ Builders Pvt Ltd for building a residential complex. PQ Builders Pvt Ltd agrees to transfer 5 out of 50 flats to be built in the residential complex to Mr. J as a consideration for transfer of development right.
Some other relevant details are as under:
1. Development right transferred on 28th June 2018
2. Construction began on 1st August 2018
3. Construction of complex over on 4th March 2019
4. Allotment letters issued on 6th March 2019
By application of the above discussed notification, Time of supply is 6th March 2019.
Author Bio
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