Roll out of GST has given rise to innumerable questions as to the applicability of its provisions on various business transactions. The economic environment of India is both vast as well as complex giving rise to novel and unique situations or business arrangements calling for urgent clarity with a tug of war between astute legislature on the one and the professionals and entrepreneurs with business and legal acumen on the other hand to draw inferences and deduce the favorable interpretations in their favor. Amidst this chaos the appellate authorities and courts try to fill the gap and provide clarity on the legislative intent. One such issue calling for clarity is the Time of Supply of goods and services.
The subject assumes significance in the wake of the fact that the very incidence of levy of GST occurs at the time of supply of goods or services. Hence it is necessary to understand these provisions to avoid the hostile clutches of GST authorities and avoid punitive actions at their end.
The Time of supply of Goods has been provided under sections 12 and Time of Supply of Services has been provided under section 13 of the CGST Act, 2017 (hereinafter referred to as the Act) . Besides, section 14 also provides determination of Time of supply of goods or services or both in a complex situation wherein the tax rate changes unexpectedly leaving the tax payers in a lurch thereby providing them certainty to avoid such taxing situation.
Time of supply of Goods-
As per section 12 of the Act, the time of supply goods is described as under-
1. General Principle– time of supply of goods shall be Earlier of the following events:
Actual date of invoice or Due date u/s 31 to issue invoice
Date of receipt of payment by the supplier
(Date of Receipt= Earlier of the Date of actual Receipt or
Date of booking entry in books)
**It is explained in the section that the supply shall be deemed to be made to the extent of the value provided in the invoice. E.g if a contract has been entered into between a contractor A and M/s ABC Pvt. Ltd. For supply of goods for Rs. 2 crores to be completed in 2 years and the bill raised in the current year is for Rs. 75 Lakhs as per principles of revenue recognition, then the supply shall be to the extent of Rs. 75 Lakhs only.
2. Reverse Charge- since under reverse charge mechanism, the Recipient of the Goods is liable to discharge the tax liability, his internal business transactions have been made the base to determine the time of supply. Hence, under Reverse charge the Time of supply shall be the Earlier of the following events:
A. Receipt of goods by recipient or
B. Earlier of – Booking entry of payments in books
Actual payment from the bank.
C. The 31st day from the issue of invoice from the Supplier.
e.g if A receives the goods supplied by B on 15th of July, 2020. He issues a cheque on 20th of July, 2020 and books the same on 20th July, 2002. The cheque is cleared from bank on 27th of July, 2020. In this case the Time of supply shall be 15th of July, 2020 as per above provision.
3. Supply of Vouchers- in case where a voucher has been issued by a supplier the Time of Supply of such voucher shall be:
A. if the supply can be identified- Date of issue of such supply or
B. Time of redemption of the voucher in any other case.
e.g if A purchases an LED TV from B on 1-07-2020 and B provides him a voucher containing movie tickets for a certain day or a certain show, then Time of supply of such voucher is 01-07-2020 itself. On the other hand if B provides a gift voucher to be redeemed at say, Archies shop within say a month to get discount of 10% on purchases made at Archies, the Time of supply shall be the date when such voucher is redeemed.
4. Residuary Principle- if the Time of supply cannot be determined through any of the above methods, it shall be determined on the date of
a. Filing of periodic return if need to be filed or
b. date of payment of tax in any other case.
Time of Supply of Services-
As per section 13 of the Act, Time of supply of Services is described as follows:
1. General Principle– time of supply of services shall be Earlier of the following events:
a. Date of issue of invoice as per section 31 or
Date of receipt of payment, whichever earlier. OR
b. Date of Provision of service if invoice is not to be issued as per section 31 or
Date of receipt of payment, whichever earlier OR
c. Date of recording in books of recipient of services by the recipient if above provisions cannot be applied.
**(Date of Receipt= Earlier of the Date of actual Receipt or Date of booking entry in books)
**It is also explained here that in the section that the supply shall be deemed to be made to the extent of the value provided in the invoice. E.g if a contract has been entered into between a contractor A and M/s ABC Pvt. Ltd. For construction of building for Rs. 2 crores to be completed in 2 years and the bill raised in the current year is for Rs. 75 Lakhs as per principles of revenue recognition, then the supply shall be to the extent of Rs. 75 Lakhs only.
2. Reverse Charge- since under reverse charge mechanism, the Recipient of the services is liable to discharge the tax liability, his internal business transactions have been made the base to determine the time of supply. Hence, under Reverse charge the Time of supply shall be the Earlier of the following events:
A. Date of recording payment in books or
Date of actual payment from bank whichever earlier OR
B. 61st Day from the date of issue of invoice by the supplier.
If Time of supply of service cannot be determined as above it shall be the date when the recipient records such receipts in his books i.e he credits the supplier account in his books.
3. In case of supply of service by an Associate enterprise the Time of supply shall be earlier of:
a. Date of recording in books or
b. Date of actual payment.
4. Supply of Vouchers- Same as in case of Time of supply of Goods.
Provisions common for supply of Goods and Services-
1. Penalties, Late payment charges etc.-
Where the supplier levies penal charges for delay or default in payment, the Time of supply for such receipts shall be the date of actual receipt of such punitive charges reason being the uncertainty involved for such delays etc in the payment by the recipient so it is taxed at the time when received by the supplier.
2. Where the supplier receives invoice amount upto Rs 1000 more than the invoice amount, he may pay GST liability i.r.o such amount in the current invoice itself and need not wait to raise next invoice for such amount.
Change in rate of GST amidst the Supply transaction- Section 14
Nevertheless the sections 12 and 13 the provisions of section 14 shall prevail in such situation. As far as change of GST tax rate in between the transaction is concerned, it is pertinent to consider following three events in the transaction
1. Supply of Goods or Services (the main trigger for incidence of tax)
2. Issue of Invoice and
3. Receipt of payment.
Now for this section, Supply of goods or services has been taken as the base to determine Time of supply coupled with other factors i.e issue of invoice and receipt of payment which is elaborated as follows:
When supply is made Before the change of tax rate-
|Event||Time of supply|
|If Invoice issued and payment received after change of tax rate||Earlier of Issue of invoice or Receipt of payment.|
|Invoice issued before change of tax rate but payment received after change of tax rate||Date of issue of invoice.|
|Invoice issued after change of tax rate but payment received||Date of receipt of payment.|
A. When supply is made After the change in tax rate-
|Event||Time of supply|
|Invoice issued before change of tax rate but payment received after change of tax rate||Date or receipt of payment|
|Invoice issued and payment received before change of tax rate||Earlier of
Issue of invoice or
Date of receipt of payment.
|Invoice issued after change of tax rate but payment received before change of tax rate||Date of issue of invoice.|
It is further provided therein that the date of receipt of payment shall be the date of credit in the bank of the supplier if the payment is credited after 4 days of change of tax rate.
The above complex matrix can be learnt by what I call the “majority rule” viz. subject to the Trigger event i.e supply the Time of supply shall fall under the period wherein two of the 3 events mentioned supra fall.
Above discourse is the product of my study, research , self analysis and understanding of the bare provisions and other related resources and is being presented for the simplified understanding of the readers and in no way constitute advise of consultancy. As such, the readers are advised to apply their own discretion and go through the law as prevailing at the time of reading the article and take professional advice before taking action based on this discourse.