Bhushan Gadiya
The Goods and Service tax is going to the single biggest reform in Indirect Taxes of Independent India. It is going to radically change the way business is done in the country and is going to have a far reaching impact on our economy. The parliament has already cleared the Central Goods and Service Tax Bill among three others on 6th April 2017 thus given it the status of an Act.
The Act passed by the parliament has got many changes as compared to the previous Model GST law of November 2016, which was there in the public domain. One such change was made in the Chapter IV “TIME AND VALUE OF SUPPLY” in Sec 13- relating to time of supply of services of the CGST Act.
Sec 13(2) of the Draft Law was as follows:
“The time of supply of services shall be the earlier of the following dates, namely:-
(a) the date of issue of invoice by the supplier or the last date on which he is required, under section 28, to issue the invoice with respect to the supply;
Or
(b) the date on which the supplier receives the payment with respect to the supply:”
It meant that the time of supply shall be earlier of the date when the Invoice is issued or required to be issued or date when supplier received the payment.
The revised sec 13(2) as per the Act passed in the parliament is as follows:
“(2) the time of supply of services shall be the earliest of the following dates, namely:—
(a) the date of issue of invoice by the supplier, if the invoice is issued within the period prescribed under sub-section (2) of section 31 or the date of receipt of payment, whichever is earlier;
Or
(b) the date of provision of service, if the invoice is not issued within the period prescribed under sub-section (2) of section 31 or the date of receipt of payment, whichever is earlier;
Or
(c) the date on which the recipient shows the receipt of services in his books of account, in a case where the provisions of clause (a) or clause (b) do not apply:”
Now on plain reading of the section they say that for time of supply of service we shall first see whether invoice has been issued within due date. If yes then the time of supply shall be Date of Invoice or payment whichever is earlier (sub clause (a)). If invoice isn’t issued within due date, then it shall be date on which service have been provided or payment whichever is earlier (sub clause (b)). And where sub clause (a) or (b) do not apply then it shall be the date when recorded in the books of accounts.
But if we read the section closely, it starts with – The time of supply of service shall be “Earliest of the following dates” and then (a), (b), (c). So by bare reading it means that time of supply is earliest of event a or event b or event c. But it is very clear that sub clause (a) and sub clause (b) are mutually exclusive meaning that both of them cannot happen together. Either (a) or (b) may happen. Further sub clause (c) says that if either sub clause (a) or sub clause (b) is not applicable (which will happen in every scenario as one of them is always not going to apply) then the time of supply of service shall be the date of recording in the books of accounts. So on reading the whole section together it just doesn’t make any sense. The intention of the law maker to include the words “shall be earliest of” in the beginning of the section and then again at the end of both the sub clauses (a) and (b) is unclear. It is creating unnecessary confusion. They could have removed those words from the first line of the section and then things would have been crystal clear. The most logical reason to this being that they have copied the old section (as per the draft law) as it is and then replaces the older sub clause (a) and (b) with the new sub clause(a), (b) and (c) without reading the opening lines of the section.
The revised section which should have been is as given below
“(2) The time of supply of services shall be the:—
(a) the date of issue of invoice by the supplier, if the invoice is issued within the period prescribed under sub-section (2) of section 31 or the date of receipt of payment, whichever is earlier;
Or
(b) the date of provision of service, if the invoice is not issued within the period prescribed under sub-section (2) of section 31 or the date of receipt of payment, whichever is earlier;
Or
(c) the date on which the recipient shows the receipt of services in his books of account, in a case where the provisions of clause (a) or clause (b) do not apply:”
Thus on reading of the above corrected section now things look clear. Hopefully the law maker will take a cognizance of this and make the necessary changes in the law before it is notified to clear any misinterpretations at a later stage.
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