Understanding Time of Supply for GST Calculation

In the realm of taxation, understanding the time of supply (TOS) is fundamental. It plays a pivotal role in determining when the tax liability arises for both goods and services. Accurate assessment of TOS is crucial, as miscalculations can lead to revenue loss for the government. In this article, we will delve into the relevance and overview of time of supply from a revenue perspective, focusing on provisions in the GST Act and providing illustrative examples.

Relevance/ Overview of Time of Supply From Revenue Point of View

In order to calculate and discharge tax liability it is important to know the date when the tax liability arises i.e. the date on which the charging event has occurred. If Tax Payer wrongly assess the time of supply then there will be loss to the Revenue/Department, I will explain you with an illustration.

Lets Suppose TOS as per GST Act is AUG 2023 but as per Tax Payer Calculation TOS will be SEP-2023 and Tax Payer discharge will his tax liability on the date of filing the return of SEP GSTR -3B i.e. 20 OCT 2023 but as per GST Act liable to pay tax arise on AUG-2023 GSTR-3B i.e. 20-SEP-2023 so there will be 1 Month delay in payment of Tax Liability and there will be interest loss to Revenue/Department

In GST Act, it is known as Time of Supply. GST Act has provided separate provisions to determine the time of supply of goods and time of supply of services.

Once the time of supply is determined, the rate of GST and the amount GST payable is calculated at that point of time and such liability is to be discharged by making payment of GST within the time specified.

Provision Related to Invoice in Respect of Goods (Section-31(1)(4)(7))

Before we look forward about Time of Supply first we need to know about invoicing provision under GST because Time of Supply Event to the much will depend on Date of Invoice

Section 31(1) Time limit for issuing Invoice in case of supply of Goods

> A registered person supplying taxable goods shall, before or at the time of,—

> (a) removal of goods for supply to the recipient, where the supply involves movement of goods; or

> (b) delivery of goods or making available thereof to the recipient, in any other case, issue a tax invoice showing the description, quantity and value of goods, the tax charged thereon and such other particulars as may be prescribed:

> Provided that the Government may, on the recommendations of the Council, by notification, specify the categories of goods or supplies in respect of which a tax invoice shall be issued, within such time and in such manner as may be prescribed.

Section 31(4) Time limit for issuing Invoice in case of Continuous Supply of Goods

In case of continuous supply of goods, where successive statements of accounts or successive payments are involved, the invoice shall be issued before or at the time each such statement is issued or, as the case may be, each such payment is received.

Time of Supply of Goods Under Forward Charge Mechanism (Section-12(1)(2)(4)(5))

> Section 12 (1)

The liability to pay tax on goods shall arise at the time of supply, as determined in accordance with the provision of this section

> Section 12 (2)

Earliest of the following dates

I. The date of issue of invoice by the supplier; if invoice issue within time limit specified U/S 31 or

II. The last(Due) date on which he is required, under section 31, to issue the invoice with respect to the supply of goods; or

III. The date on which the supplier receives the payment with respect to the supply i.e.

**Date of receive of payment receive by supplier means means

Earlier of the

• Date on which the payment is recorded in the books of accounts of the supplier or
• Date on which Payment is credit to the supplier’s bank account

> Section 12 (4) Time of supply in case of supply of vouchers in respect of goods

The Time of Supply shall be-

i. The date of issue of voucher, if the supply identifiable at that point ; or

ii. The date of redemption of Voucher , in all cases

> Section 12 (5) TOS in Residual Case

Where it is not possible to determine the time of supply as per above provisions, the time of supply shall-

I. In case where a periodically return has to be filed, be the date on which such return is to be filed ; or

II. In any other case, be the date on which the tax is paid

> Section 12 (6) TOS in cases receipt of additional amount like interest , late fees etc.

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

Time of Supply of Goods Under Reverse Charge Mechanism Section-12 (3)

> The time of supply shall be the earliest of the following dates , namely:-

1. The date of the receipt of goods; or

2. The date of payment i.e.

I. (a)The date of payment as entered in the books of accounts of the recipient; or

II. (b) The date on which payment is debited in his bank account,

Whichever is earlier; or

3. The date immediately following 30 days( i.e. 31^st Day) from the date of issue invoice or any other document, by whatever name called, in lieu thereof by the supplier.

If TOS cannot be determined as above- TOS is date of entry in the books of account of the recipient of supply

Provision Related to Invoice in Respect of Services (Section-31(2)) Rule-47

> Section 31(2)

A Registered taxable person supplying taxable services shall, before or after the provision of services but within a prescribed period(Prescribed in Rule 47), issue a tax invoice

> Rule 47 Time limit for issuing tax invoice in respect of services

i. The invoice in case of taxable supply of service shall be issued within a period of 30 days from the date of supply of services

ii. Where the supplier of services is an insurer or a banking company or a financial institution, including a Non banking financial institution (NBFC), the invoice or any other document in lieu thereof is to be issued within 45 Days from the date of supply of service.

iii. In case of cessation of supply of services before completion of supply, the invoice (to the extent of the supply made before such cessation) should be issued at the time when the supply cease.

Provision Related to Invoice in Respect of Continuous Supply of Services (Section-31(5))

–

Time of Supply of Service Under Forward Charge Mechanism (Section-13(1)(2)(4)(5)(6))

> Section 13 (1)

The liability to pay tax on services shall arise at the time of supply, as determined in accordance with the provision of this section

> Section 13 (2)

The time of supply of services shall be the earliest of the following dates, namely :-

• The date of issue of invoice by the supplier, if the invoice is issued within the period prescribed under section 31 or
• The date of receipt of payment

Whichever is earlier;

or

• the date of provision of service, if the invoice is not issued within the period prescribed under section 31 or
• The date of receipt of payment

Whichever is earlier;

or

The date on which the recipient shows the receipt of services in his books of accounts, in case where the provision of clause (a) Or clause (b) do not apply

Explanation

a) Deemed supply- to the extent covered by invoice or payment : The supply shall be deemed to have been made to the extend it is covered by the invoice or, as the case may be, the payment

b) “ Date of receipt of payment” shall be

• The date on which payment is entered in the books of accounts of supplier ; or
• The date on which the payment is credited to his bank account,
  Whichever is earlier

> For Small advance upto 1000 received can be paid at the time of issue of invoice

Where the supplier of taxable services receives an amount upto Rs. 1000 in excess of the amount indicated in the tax invoice, the time of supply to the extend of such excess shall, at the option of the said supplier, be the date of issue of invoice relating to such excess payment (Proviso to section 13(2)

Thus , if advance upto Rs. 1000 is received, GST is not payable at that stage. In that case, GST will be payable when invoice is raised

> Section 13 (4) Time of supply in case of supply of vouchers in respect of goods

The Time of Supply shall be-

i. The date of issue of voucher, if the supply identifiable at that point ; or

ii. The date of redemption of Voucher , in all cases

> Section 13 (5) TOS in Residual Case

Where it is not possible to determine the time of supply as per above provisions, the time of supply shall-

I. In case where a periodically return has to be filed, be the date on which such return is to be filed ; or

II. In any other case, be the date on which the tax is paid

> Section 13 (6) TOS in cases receipt of additional amount like interest , late fees etc.

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

Time of Supply of Services Under Reverse Charge Mechanism (Section 13(3))

> The time of supply shall be the earliest of the following dates , namely:-

1. The date of the receipt of goods; or

2. The date of payment i.e.

I. (a)The date of payment as entered in the books of accounts of the recipient; or

II. (b) The date on which payment is debited in his bank account,

Whichever is earlier; or

3. The date immediately following 60 days (i.e. 61^st day) from the date of issue invoice or any other document, by whatever name called, in lieu thereof by the supplier.

If TOS cannot be determined as above- TOS is date of entry in the books of account of the recipient of supply First Proviso to Section 13(3)

> Time of supply in case of associate enterprises (Second Proviso to Section 13 (3)

In case of supply by associated enterprises, where the supplier of services is located outside india , the time of supply shall be-

a) The date of entry in the books of accounts of the recipient of supply; or

b) The date of payment,

Whichever is earlier

Illustration on TOS in case of Services Under Reverse Charge Mechanism (Section 13(3))

> XYZ Ltd engaged the service of a transporter for road transport of a consignment on 17-09­2023 and made advance payment for the transport on the same date, i,.e. 17-09-2023. However, the consignment could not be sent immediately on account of a strike in the factory, and instead was sent on 20-09-2023. Invoice was received from the transporter on 22-09-2023. What is the TOS of the transporter service??

As per Section 13 (3) of CGST Act 2017, Time of supply of service taxable under reverse charge is the earliest of the following two dates in terms of section 13(3)

• Date of Payment
• 61^st Day from the date of issue of invoice

In this case, the date of payment precedes 61^st day from the date of issue of invoice by the supplier of service. Hence, the sate of payment , that is 17-09-2023 will be treated as Time of supply

Note :- Transporter service is taxed on reverse charge basis

Determination of Time of supply in case of change in the rate of tax (Section 14)

i. Notwithstanding anything contained in section 12 or 13, the time of supply, where there is a change in the rate of tax in respect of goods or services or both, shall be determined in following manner namely

a) In case the goods or services or both have been supplied BEFORE the change in rate of tax

b) In case the goods or services or both have been supplied AFTER the change in rate of tax

(ii) “Date of receipt of Payment” shall be

a) The date on which the payment is entered in the books of account of the supplier; or

b) The date on which the payment is credited to his bank account

Whichever is earlier

However, 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 4 working days from the date of change in the rate of tax

Determine the TOS in following Case. The rate of CGST has been increased to 12% w.e.f 01-12-2023, before the said date, the rate of tax was 5%

** Earliest of

• Date of Invoice
• Date of Payment

Conclusion:

Understanding the time of supply is paramount in tax compliance. Accurate determination ensures that tax liabilities are settled promptly, avoiding revenue losses. The GST Act provides clear provisions for determining the time of supply for goods and services, both in forward and reverse charge mechanisms. By adhering to these provisions and principles, businesses can ensure smooth tax compliance and minimize the risk of interest and penalty charges.