In order to determine the tax liability under GST, it is important to know the date when the tax liability arises i.e., the date on which the charging event has occurred. In GST law, it is known as Time of Supply. GST law provides separate provisions to determine the time of supply of goods and time of supply of services under Sections 12, 13 & 14 of the CGST Act 2017. While earlier to GST regime under indirect taxation, the taxable event was either sale or removal, under GST regime it is the supply. Therefore, we need to discuss here the time of taxation/time of supply, and understand how the different provisions on time of taxation under GST regime works in different situations of supply of goods and supply of services.
1. TIME OF SUPPLY OF GOODS:
(i) Default Rule:
The time of supply of goods shall be the earlier of the following dates:
(a) The date of issuing of invoice (or) the last day by which invoice should have been issued; OR
(b) The date of receipt of payment.
Note-1: The date of receipt of payment shall be earlier of- (a) The date on which payment is entered in the books of accounts; OR (b) The date on which the payment is credited to bank account.
Note-2: Last date by which invoice should have been issued is the “date of removal of goods”.
(ii) Time of supply of goods when the supplier is under composition scheme:
- In such cases, time of supply of goods is the date of invoice. Time of supply of goods will be the same in case the turnover is up to 1.5 Crore even though the supplier did not opt for composition scheme.
- In other cases, where supply involves movement of goods, time of supply is the date of invoice issued at the time of removal of goods.
- In all other cases, time of supply is the date of delivery of goods.
(iii) Time of supply of goods in respect of the excess amount (up-to Rs.1000) received over the amount mentioned in invoice:
Time of supply in respect of such excess amount received will be the “date of issue of invoice” or the “date of receipt of payment”, as preferred by the supplier.
(iv) Time of supply in case of continuous supply of goods:
In case of continuous supply of goods, time of supply is the “time when each statement is issued”, or the “time when each payment is received”, whichever is earlier.
(v) Time of supply of goods sent on approval basis:
Prior to GST regime, any goods sent by a supplier to a recipient was eligible for exemption from tax subject to certain conditions. But under the current GST regime, goods sent on approval basis is treated as deemed supply and accordingly it is taxable if the recipient fails to return the goods within a stipulated time period. So, to fix the tax liability, it has become important to know the time of supply of goods in such cases.
Time of supply of goods sent on approval basis is the “time when it becomes known that supply is taken place”, or the “Six month from the date of removal of goods”, whichever is earlier.
(vi) Time of supply of goods under RCM:
Time of supply of goods taxable under reverse charge basis is the earlier of the following three dates:
(a) Date of receipt of goods, OR
(b) Date of receipt of payment, OR
(c) Date Immediately following 30 days from the date of issue of invoice.
Note: If time of supply cannot be determined with the help of above provisions, then the time of supply shall be the date on which entry in the books of the recipient of goods is made.
2. TIME OF SUPPLY OF SERVICES:
(i) Default Rule:
- In case invoice is issued within 30 days from the date of supply of service (45 days in case of bank/NBFC/Insurance companies), time of supply of service is the “date of issue of invoice”, or the “date on which supplier receives the payment”, whichever is earlier.
- In case invoice is issued after 30 days/ 45 days (as said above), time of supply of service is the “date of provision of service”, or the “date on which supplier receives the payment”, whichever is earlier.
(ii) Time of supply of services under RCM:
- In case the supplier of services is located in India, the time of supply is “date of receipt of payment”, or the “date immediately following 60 days from the date of issue of invoice”, which-ever is earlier.
- In case the supplier of services is located out of India (Associated enterprises), the time of supply of services is the “date of entry of service in the books of account of the recipient”, or the “date of receipt of Payment”, which-ever is earlier.
Note: If time of supply of services cannot be determined with the help of above provisions, then the time of supply shall be the date on which entry in the books of the recipient of services is made.
3. TIME OF SUPPLY OF GOODS/SERVICES (CASES OF COMMON RULE FOR BOTH):
(i) Time of Supply of Vouchers for Goods & Services:
(a) If the supply is identifiable at the point of issue of voucher, time of supply is the “date of issue of voucher”.
(b) If the supply is not identifiable at the point of issue of voucher, the time of supply is the “date of redemption of voucher”.
(ii) Time of supply of goods or services in respect of addition in the value of supply by way of interest, late fees or Penalty:
In respect of any addition to the value of supply by way of interest, late fees, or penalty, the time of supply will be the “date on which that interest/late fees/penalty is received by the supplier”.
(iii) Time of supply in case of construction projects (Commencing after 1.4.19):
The supply of TDR, FSI, long term lease (premium) of land by a land owner to a developer is exempted subject to the condition that the constructed flats are sold before issuance of completion certificate and tax is paid on them. Exemption of TDR, FSI, long term lease (premium) shall be withdrawn in case the flats are sold after issue of completion certificate, but such withdrawal shall be limited to 1% of value in case of affordable houses and 5% of value in case of other than affordable houses. The liability to pay tax on TDR, FSI, long term lease (premium) shall be shifted from landowner to builder under the Reverse Charge Mechanism (RCM).
In respect of the above said provisions of taxation, the time of supply in case of TDR, FSI, long term lease (premium) of land under RCM in respect of flats sold after completion certificate will be the date of issue of completion certificate or first occupation of the project, whichever is earlier. Similarly, in respect of the liability of builder to pay tax on construction of houses given to land owner in a JDA, the time of supply will be the date of completion or first occupation of the project, whichever is earlier.
(iv) Time of supply in case of change in Rate of Tax in respect of supply of goods or services:
|
Case |
Supply completed before date of change in tax rate | Invoice issued before the date of change in tax rate | Payment received before the date of change in tax rate | Time of supply |
|
1 |
Yes | No | No |
Earliest of the date of invoice or payment |
| 2 | Yes | Yes | No | Date of issue of invoice |
| 3 | Yes | No | Yes | Date of receipt of payment |
| 4 | No | Yes | Yes | Earliest of the date of invoice or payment |
| 5 | No | Yes | No | Date of receipt of payment |
| 6 | No | No | Yes | Date of issue of Invoice |
Note: Date of receipt of payment in case of change in rate of tax:
(a) If the amount is credited to the bank account within 4 working days from the date of such change: Date of book entry or date of bank entry, whichever is earlier.
(b) If the amount is credited to the bank account after 4 working days from the date of such change: Date of bank entry.
(v) Time of supply of goods or services (Residual provisions):
In case, it is not possible to determine the time of supply under any of the aforesaid provisions, the time of supply will be decided as per the following provisions:
- In cases where periodical return has to be filed, time of supply shall be the due date of filing the return.
- In all other cases, time of supply of goods/services shall be the date of payment of tax.
CONCLUSION:
While under pre-GST regime of indirect taxation, the taxable event was sale or removal, under GST regime it is supply. Accordingly, we need to revisit the time of taxation, and understand how the time of taxation under GST works-out. Under the GST regime, the tax collection event occurs at the earliest of the above said dates discussed under different provisions. This confirms that the government wants to collect tax at the earliest possible time. As there are multiple parameters for determining the time of supply i.e., the occurrence of the charging event, it becomes challenging to maintain and reconcile the same between financials and GST records. For this reason, has become crucial for the business persons and professionals in GST field to have a clear understanding over these provisions related to determination of time of supply.
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