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TIME OF SUPPLY UNDER GST (GOODS AND SERVICES TAX)

TIME OF SUPPLY UNDER GST (GOODS AND SERVICES TAX)

TIME OF SUPPLY UNDER GST (GOODS AND SERVICES TAX)

As we all are aware, Goods and Services Tax (GST) is a tax on supply of goods and services. The two important factors that determine tax implication is the Place of Supply and Time of Supply. We have already seen the significance of place of supply in the previous article. Now let us know the other important part, Time of Supply under GST.

The time of supply fixes the point when the liability to charge Goods and Services Tax (GST) arises. It also indicates when a supply is deemed to have been made. The concept of Time of Supply under GST gains its importance because of its importance determining of tax levy, by the title it is not just determining the time of supply but it forms the ground for the following:

  • When tax becomes payables
  • Rate of Tax

To understand the Time of Supply under GST, the following sections from CGST shall act predominantly:

  • Section 12 – Time of supply of goods under GST
  • Section 13 – Time of supply of service under GST
  • Section 14 – Time of supply when change in rate of tax in respect of supply of goods & services.

Further, there are few other sections that forms having its connection with the above sections and that brings in appropriate understanding, namely.

  • Section 2 (32) – Continuous supply of goods
  • Section 2 (32) – Continuous supply of service

Let’s start with the instrumental sections and the look in the main provisions

 

SECTION 2 (32) – CONTINUOUS SUPPLY OF GOODS

The text from the acts reads as “continuous supply of goods” means a supply of goods which is provided, or agreed to be provided, continuously or on recurrent basis, under a contract, whether or not by means of a wire, cable, pipeline or other conduit, and for which the supplier invoices the recipient on a regular or periodic basis and includes supply of such goods as the Government may, subject to such conditions, as it may, by notification, specify“

A simple analysis of the section gives the meaning what amount to be a continuous supply under the Act, to break it easy it can be said that presence of the following conditions, it amounts to be a continuous supply, where:

  • There exists an contract or agreement
  • Supply is Continuous or recurring
  • Mode of supply may or may not be in cable, pipeline, wire, etc.,
  • Payment is periodic or time bound

Also includes supply of any other good as the Central Government may notify.

 

Browse the related video

 

SECTION 2(33) – CONTINUOUS SUPPLY OF SERVICE

Continuous supply of services” means a supply of services which is provided, or agreed to be provided, continuously or on recurrent basis, under a contract, for a period exceeding three months with periodic payment obligations and includes supply of such services as the Government may, subject to such conditions, as it may, by notification, specify

The definition of continuous supply of service is similar to that of goods but with specific conditions, namely:

  • There exists an contract or agreement
  • Supply is Continuous or recurring
  • Payment is periodic or time bound
  • The supply duration is more than 3 months

Also includes supply of any other good as the Central Government may notify.

SECTION 12 – TIME OF SUPPLY OF GOODS UNDER GST

Time being the determinant of point of charge where Goods and Services Tax arises has been exclusively handled under the provisions. The provision relating to time of supply of goods provides that:

  • Tax Liability: Liability to pay tax on goods arises only at the time of supply
  • Forward Charge: When invoiced is issued within prescribed period, the time of supply of goods shall be the earlier of the following dates, namely:

– the date of issue of invoice by the supplier or
– the date on which the supplier receives the payment with respect to the supply.

Note: Further, Supply is deemed to have been made to the extent it is covered by invoice or payment. And the payment date shall be the date of entry in books account/ credit in bank account whichever earlier

The prescribed limit in the section refers to the limit as per provisions of Section 31 that deals with Tax Invoice.

Reverse Charge: In case of supplies in respect of which tax is paid or liable to be paid on reverse charge basis, the time of supply shall be the earliest of the following dates, namely:–

  • the date of the receipt of goods; or
  • the date of payment as entered in the books of account of the recipient or the date on which the payment is debited in his hank account, whichever is earlier; or
  • the date immediately following thirty days from the date of issue of invoice or any other document, by whatever name called, in lieu thereof by the supplier:

However, when it is not possible to determine the time of supply with any of the above three provision, the time of supply shall be the date of entry in the books of account of the recipient of supply.

Voucher: In case of supply of vouchers by the supplier, the time of supply shall be-

  • the date of issue of voucher, if the supply is identifiable at that point; or
  • if not identifiable, the date of redemption of voucher.

Residual: Where it is not possible to determine the time of supply under forward charge, reverse charge or voucher supply, the time or supply shall be:

  • in a case where a periodical return has to be filed, be the date on which such return is to be filed; or
  • in any other case, be the date on which the tax is paid.

Value addition after sale: This provision provides for the value addition after sale of any sort i.e., interest, late fees, penalty etc. The 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.

SECTION 13 – TIME OF SUPPLY OF SERVICE UNDER GST

Similar to goods, time of supply of services has been provided in the law for unambiguous approach in determining the time of supply. They are:

Tax Liability: Liability to pay tax on services arises only at the time of supply

Forward Rate: In here the provisions have a sub-classification based on the issue of invoice, viz.

When invoiced is issued within the prescribed period, the time of supply shall be earliest of the following:

  • the date of issue of invoice by the supplier, Or
  • the date of receipt of payment,

When invoiced is not issued within the prescribed period, the time of supply shall be earliest of the following:

  • the date of provision of service, Or
  • the date of receipt of payment

Note: Further, in case of non-applicability of above two scenarios, the time of supply shall be the date on which the recipient shows the receipt of services in his books of account

The prescribed limit in the section refers to the limit as per provisions of Section 31 that deals with Tax Invoice.

Reverse Charge: In case of supplies in respect of which tax is paid or liable to be paid on reverse charge basis, the time of supply shall be the earlier of the following dates, namely:–

  • the date of payment as entered in the books of account of the recipient or the date on which the payment is debited in his bank account, whichever is earlier; or
  • the date immediately following sixty days from the date of issue of invoice or any other document, by whatever name called, in lieu thereof by the supplier:

However, when it is not possible to determine the time of supply with any of the above three provision, the time of supply shall be the date of entry in the books of account of the recipient of supply.

Voucher: In case of supply of vouchers by the supplier, the time of supply shall be-

  • the date of issue of voucher, if the supply is identifiable at that point; or
  • if not identifiable, the date of redemption of voucher.

Residual: Where it is not possible to determine the time of supply under forward charge, reverse charge or voucher supply, the time or supply shall be:

  • in a case where a periodical return has to be filed, be the date on which such return is to be filed; or
  • in any other case, be the date on which the tax is paid.

Value addition after sale: This provision provides for the value addition after sale of any sort i.e., interest, late fees, penalty etc. The 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.

Section 14 – Time of Supply when change in rate of tax in respect of supply of goods and services

This section talks about the change in rate of tax in conjunction with time of supply of goods / services. They are several events involved in the supply such as invoice, the actual supply and payment. These events/ transactions in normal parlance take place on different dates. Thus the change of rate of tax provision under this section has an overriding effect on the time of supply under the Section 13

Under this section, the provision relating to the change of rate of tax can be classified into two, viz.

Supply happens before the change in rate, then time of supply shall be:

  • After change invoice issued and payment received: Date of invoice or payment whichever is earlier.
  • Invoice before change but payment received after change: Date of invoice.
  • Payment received before change but invoice after change: Date of Payment.

Supply happens after the change in rate, then time of supply shall be:

  • Invoice before change but payment received after change: Date of Payment.
  • Before change invoice issued and Payment received: Date of invoice or payment whichever is earlier.
  • Payment received before change but invoice after change: Date of invoice.

 

MUST READ:

GST Composition Scheme Rules
Place of Supply In GST
VALUE OF SUPPLY UNDER GST

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June 29, 2020

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