Direct & Indirect Taxes, Tax Ready Reckoner, Tax Management, Tax Act. & Rules, Tax Planning & Tax Savings.

Direct & Indirect Taxes, Tax Ready Reckoner, Tax Management, Tax Act. & Rules, Tax Planning & Tax Savings.

Time of Supply of Goods under CGST/SGST Act, 2017

The liability to pay GST on Goods / Services arises at the time of supply of goods and services. The time of supply fixes the point when the liability to charge GST arises. Due date of payment of GST depends upon time of supply. GST pertaining to supply of current month should be normally paid on monthly basis by 20th day of succeeding month.

Sections 12 and 13 provide parameters to find out time of supply of goods/services. Section 14 covers tax incidence when there is change in rate of tax in respect of supply of goods/services. To understand implication of these provisions, one should note down the following points –

Time of Supply of Goods under CGST/SGST Act, 2017
Time of Supply of Goods under CGST/SGST Act, 2017

Statutory time for issue of invoice in the case of Taxable Supply of Goods –

Section 31 covers time of issue of invoice in the case of supply of goods. Invoice is required to be prepared before or at the time of –

  1. removal of goods for supply to the recipient (where the supply involves movement of goods); or
  2. delivery of goods; or
  3. making available of goods to the recipient.

The obligation of the supplier of goods is to issue the invoice latest by performance of any of the above 3 activities.

For instance, X dispatches goods to Y from his depot on November 12, 2020. X can issue invoice on or before November 12, 2020. The following points should be kept in view –

>>        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 each such payment is received.

>>        Goods on Approval –

Invoice of goods sent on approval is required to be issued –

  1. within 6 months from the date of removal of goods, or
  2. the date when recipient indicates that he has accepted the supply of goods,

whichever is earlier.

Date of receipt of payment –

Generally, the date of receipt of payment is the date on which payment is  entered in the books of account of the supplier or the date on which payment is credited to his bank account,  whichever is earlier.

For instance :

X, the supplier of goods/services, receives a cheque on October 20, 2020. It is  recorded in his books on October 21. It is sent for collection to the bank on October 22 and bank credit the same  in the current account of X on October 23. The date of receipt of payment in this case is October 21, 2020 (i.e., the  date of recording in the books of account or date of credit by bank, whichever is earlier).

>>        Change in rate of tax in respect of supply of goods/services –

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.

The CGST/SGST Act provides separate provisions for—

— Time of supply of goods;

and

— Time of supply of services.

1. Time of Supply of Goods [Section 12 of CGST Act. 2017]

(1)   When shall the Liability to pay GST on Goods arise [Section 12(1) of CGST Act, 2017]

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

(2) Time of Supply of Goods, where supplier is liable to pay GST under Forward Charge [Section 12(2) of CGST Act, 2017]

The time of supply of goods shall be the earlier of the following dates, namely:—

(a)        The date of actual issue of invoice by the supplier or the last date on which he is required, under section 31(1), to issue the invoice with respect to the supply;

The last date for issuance of an invoice under section 31 shall be determined in the following manner:

Where supply involves movement of goods Where supply does not involve movement of goods
Before or at the time of removal of goods for supply to the recipient Before or at the time of delivery of goods or making the goods available to the recipient

Or

(b)        The date on which the supplier receives the payment with respect to the supply of Goods

The date on which the supplier receives the payment shall be—

— the date on which the payment is entered in his books of account or

— the date on which the payment is credited to his bank account,

whichever is earlier.

Thus, events like of date of actual issue of invoice, dale of receipt of payment and the last date on which supplier is required to issue the invoice of such supply shall be the relevant factors to determine the time of supply.

Example

R supplies certain material to G on 10.5.2020 and raises the invoice on the same date. The payment was received on 25.5.2020 and it was entered in his books of account on the same date and credited in his bank account on 27.5.2020. in this case, the time of supply shall be 10.5.2020 (i.e. date of actual issue of invoice).

If in the above case, the invoice was raised on 15.6.2020, the time of supply shall still be 10.5.2020, as the last date on which the invoice was required to be issued as per section 31(1) was before or at the time of removal of goods.

Illustration :

R, a manufacture of machines received an advance of Rs. 1,20,000 along with the purchase order on 15.4.2020 for supply of machine X for Rs. 20,00,000 to be manufactured according to the specifications. Advance payment was entered in the books of account on 16.4.2020 and credited in his bank account 1&4.2020. The machine is manufactured and after approval has been delivered to the buyer on 25.4.2020 and the invoice was raised at the time of removal The balance payment of Rs. 18,80,000 was received on 15.5.2020 which was recorded in the books of accounts of Ron the same date and was credited in his bank on 17.5.2020.

See also  GST Registration under GST Law

Determine the time of supply.

Solution:

In light of Notification No. 66/2017-CT, date of advance payment is not relevant for determining time of supply. Hence, the time of supply of machine for the entire value of Rs. 20,00,000 shall be 25.4.2020 when the invoice was raised which is same as the last date on which the invoice with respect to the supply is required to be issued under section 31(1) (i.e. before or at the time of removal of goods for supply to the recipient)

Illustration :

R issues an invoice of Rs. 64,100 for supply of goods on 10.4.2020 and received Rs. 65,000 in his bank through RTGS on the same date which was credited in his books of account on 11.4.2020 on receipt of intimation from the bank.

Determine the time of supply of goods and the time of supply of excess payment

What will be your answer if the payment received was Rs. 70,000 instead of Rs. 65,000 ?

Solution

(1)        Time of supply of goods

Time of supply of goods shall be 10.4.2020 as time of advance payment is not relevant for determining the time of supply of goods in view of Notification No. 66/2017-Cl

(2)        Time of supply of excess payment of Rs. 900

R has received Rs. 900 in excess which cannot be taken as payment for invoice issued on 10.4.2020.

Hence, in this case R will adjust the excess amount against the next supply.

Consequently, the time of supply for Rs. 900 shall be taken as the date of issue of next invoice.

(3)        Time of supply of excess payment of Rs. 5,900

There will be no change in the answer as the payment/excess payment has no relevance for determining the time of supply.

(3) Time of Supply of Goods where GST is Levied on Reverse Charge Basis [Section 12(3) of CGST Act, 2017]

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:—

(a)        the date of the receipt of goods; or
(b)        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
(c)        the date immediately following 30 days from the date of issue of invoice or any other document, by whatever name called, in lieu thereof by the supplier.

It means that the 31st day from the date of issuance of invoice by the supplier shall be the third date.

Where it is not possible to determine the time of supply under clause (a) or clause (b) or clause (c), the time of supply shall be the date of entry in the books of account of the recipient of supply.

Illustration:

R, a registered person, supplied certain goods to G also a registered person. The tax in respect of aforesaid goods is liable to be paid on Reverse Charge Basis. Other details in respect of the above transaction are as under:

(a) Date of the receipt of goods by G 26.11.2020
(b) Date on which the payment is made and entered in the books of account by G 22.12.2020
(c) Date when the payment is debited in the bank account of G 24.12.2020
(d) Date of issue of Invoice by R, the supplier 20.11.2020
(e) Date immediately following 30 days from the date of issue of invoice by the supplier 21.12.2020

Determine the time of supply of goods under reverse charge basis.

Solution :

 Time of supply in the above case, shall be earlier of the following dates:

(a) Date of the receipt of goods by G 26.11.2020
(b) Date on which the payment is made and entered in the books of account by G 22.12.2020
(c) Date when the payment is debited in the bank account of G 24.12.2020
(dl Date immediately following 30 days from the date of issue of invoice by the supplier 21.12.2020

Thus, the time of supply of goods shall be 26.11.2020, being the earliest of the above dates and G shall have to pay GST under reverse charge basis.

(4) Time of Supply in case of Vouchers [Section 12(4) of CGST Act, 2017]

Clauses Situation Time of Supply
(a) If the supply is identifiable at the point at which voucher is issued The date of issuance of the voucher (Not relevant for advance payment in view of Notification
No. 66/2017-CT)
(b) In all other cases i.e. the supply is not identifiable at the point at which voucher is issued The date of redemption of voucher

As per Notification No. 66/2017-CT, only section 12(2)(a) (i.e. date of actual issue of invoice by the supplier or the last date on which he is required, under section 3 1(1), to issue the invoice with respect to the supply) is relevant for determining the time of supply. In case of vouchers, where the supply was identifiable at the point at which the voucher was issued, amounted to advance payment and was thus time of supply in such case was the date of issuance of voucher (i.e. advance payment)

Thus in both the above cases, the time of supply shall be the date of redemption of voucher.

Meaning of “Voucher” [Section 2(118) of CGST Act. 2017]:

“Voucher” means an instrument where there is an obligation to accept it as consideration or part consideration for a supply of goods or services or both and where the goods or services or both to be supplied or the identities of their potential suppliers are either indicated on the instrument itself or in related documentation, including the terms and conditions of use of such instrument e.g. gift vouchers, pre-paid vouchers, etc.

(i) Example of clause (a) above

‘R’ receives Vouchers for Rs. 10,000 on 11.5.2020 from Raymonds Ltd. for inward supply of a woolen suit. The woolen suit was purchased on 10.6.2020 by redeeming the said voucher. In this case, the time of supply shall be as under –

(1)          Position before issue of notification no. 66/2017-CT dated 15.11.2017 –

The date of issue of voucher (i.e. 11.5.2020), because the item of supply i.e. woolen suit is identifiable at that point. As the item of supply is identifiable, tax liability of Raymonds Ltd. can be determined at the time of issuance of voucher as payment for the woolen suit was received at that time.

(2)          Position after issue of notification no. 66/2017-CT dated 15.11.2017 –

The date of redemption of voucher (i.e. 10.6.2020), as the payment received at the time of issuance of voucher is in the nature of advance payment which is no longer relevant in view of the above notification.

(ii) Example of clause (b) above

R purchases gift voucher for Rs. 10,000 on 11.5.2020 from a trader M/s Croma, which deals in variety of products. The aforesaid voucher is valid for a period of three months. In this case, the time of supply shall be the date of redemption of voucher by R because the item of supply is not identifiable on the date of issue of voucher. In the absence of this tax liability of M/s Croma cannot be determined or calculated.

(5) Residuary Provision [Section 12(5) of CGST Act, 2017]

Where it is not possible to determine the time of supply under the provisions of section 12(2) or (3) or (4), the time of supply shall be as under

Clauses Situation Time of Supply
(a) Where a periodical return has to be filed The date on which such return is required to be filed
(b) In any other case Date on which GST is paid

(6) Time of Supply in relation to Value of Supply by way of Interest, etc. [Section 12(6) of CGST Act, 2017]

In many cases, the supplier of goods or services or both specifies in the invoice the credit period within which the recipient has to make the payment. Simultaneously, the aforesaid supplier also specifies in the invoice, the separate charges, described as interest or late fee or penalty that shall be charged, if the recipient fails to make the payment within the stipulated credit period.

Section 5(2)(d) of the CGST Act / SGST Act provides that the value of supply shall include interest or late lix or penalty for delayed payment of any consideration for any supply.

As per section 12(6) of CGST Act, the time of supply to the extent it relates to an addition in the value of supply by way of interest, late lix or penalty for delayed payment of any consideration shall be the date on which the supplier receives such addition in value.

If the supplier does not receive the foregoing addition in value, the same shall not be subject to tax.

Illustration:

‘S’ supplies goods to ‘R’ for Rs. 2,00,000 on 01.10.2020 on one month credit. It is also specified in the invoice that if the recipient fails to make payment within aforesaid one month, then interest @ Rs. 2,000 shall be charged for every delay of one month or part thereof. ‘R’ makes the payment of Rs. 2,00,000 on 22.11.2020. However, in respect of interest, he requests ‘S’ for complete waiver, But ‘S’ agrees for waiving only 50% of Rs. 2,000.

Consequently, ‘R’ makes payment of Rs. 1,000 as interest on 30.11.2020.

Determine the time of supply of goods and rime of supply in relation to value of supply by way of interest.

Solution :

(i)         Time of Supply of Goods

Date of invoice 1.10.2020
Date of receipt of payment (Not relevant for advance payment in view of Notification No. 66/2017-CT) 22.11.2020

Whichever is earlier

Thus time of supply of goods shall be 1.10.2020.

(ii)        Time of supply in relation to value of supply by y of interest

It shall be 30.11.2020 i.e. the date of receipt of the interest amounting to Rs. 1,000.

Note:

In case ‘S’ agrees to waive the full amount of interest then nothing will be subject to tax as there is no addition in the value of supply.

2. Time of Supply where there is change in Rate of GST in respect of Supply of Goods [Section 14 of CGST Act, 2017]

Section 14 provides parameters to ascertain time of supply in case of change in GST rate.

>> Date of receipt of payment –

For the purpose of section 14, 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).

(A)   Where the Goods have been supplied before the change in effective Rate of GST [Section 14(a)]

Section 14(a)  covers the case given below –

  1. there is a supply of taxable goods or services or both;
  2. after making this supply, there is a change in GST rate;
  3. invoice is issued or payment is received (or both invoice is issued as well as payment is received) after the change in GST rate of tax.

Time of Supply of Services–

If these conditions are satisfied, the time of supply (i.e., point of time to attract GST) shall be the  date of payment or date of issue of invoice, whichever is earlier. This rule is applicable whether change in GST  rate is upward or downward.

ILLUSTRATIONS :

Case 1 –

X is a technical consultant. On November 10, 2020, it submits a technical report to its client Y Ltd. (value of taxable supply being Rs. 10 lakh). GST rate on this supply has been changed with effect from November 15, 2020 (old rate: 28%, new rate with effect from November 15, 2020: 18%). The table given below pinpoints time of supply in different  situations –

Different situations Date of issue of invoice Date of payment Time of supply (i.e., point  of time to attract GST) Applicable GST Rate
Situation 1  November 16, 2020 November 17, 2020 November 16, 2020 New rate: 18%
Situation 2  November 17, 2020  November 16, 2020  November 16, 2020 New rate: 18%
Situation 3  November 14, 2020  November 17, 2020  November 14, 2020 Old rate: 28%
Situation 4  November 18, 2020  November 13, 2020  November 13, 2020 Old rate: 28%
Situation 5  November 19, 2020  November 9, 2020  November 9, 2020 Old rate: 28%
Situation 6  November 7, 2020  November 20, 2020  November 7, 2020 Old rate: 28%
Situation 7  January 1, 2021  January 3, 2021  January 1, 2021 New rate: 18%

Case 2 –

Suppose in Situation 4 of Case 1, payment is received by X by cheque on November 13, 2020. On the same day, it  is recorded in the books of account. It is sent for collection to the bank on November 18, 2020. It is credited in the current  account by the bank on November 22, 2020.

In this case, date of receipt of payment will be deemed to be November 22, 2020 (as cheque is credited in the bank account  after 4 working days from the date of change in GST rate). Consequently, time of supply will be November 18, 2020. Supply  of services will be taxable at the new rate of 18 per cent.

Case 3 –

Suppose in Situation 5 of Case 1, 40 per cent of payment is received on November 9, 2020 and balance 60 per cent  is received on November 20, 2020. In such a case, GST at the old rate will be applicable on 40 per cent and GST at new rate  will be applicable on balance 60 per cent payment.

Case 4 –

Suppose in different situations covered in Case 1, invoice is issued (and payment is also received) before November  15, 2020, then above rules of section 14 are not applicable.

(B) Where the Goods have been Supplied after the change in rate of GST [Section 14(b)]

Section 14(b)  covers the case given below –

  1. there is a change in GST rate;
  2. after the change in GST rate, there is a supply of taxable goods or services or both;
  3. invoice is issued or payment is received (or both invoice is issued as well as payment is received) before the change in GST rate.

If these conditions are satisfied, the time of supply (i.e., point of time to attract GST) shall be determined as  follows –

Rule One –

Invoice or payment, whichever is earlier – Time of supply will be date of issue of invoice or date of receipt  of payment, whichever is earlier, if supply is made after the change in GST rate, but invoice is issued (and  payment is received) before the change in the GST rate.

Rule Two –

Invoice or payment, whichever is later – Time of supply will be date of issue of invoice or date of receipt  of payment, whichever is later, if supply is made after the change in GST rate, but –

–           invoice is issued before (payment is received after) change in GST rate, or

–           invoice is issued after (payment is received before) change in GST rate.

This above parameter of Rule one or Rule two are applicable whether change in GST rate is upward or downward.

ILLUSTRATIONS :

Case 1 –

X, a computer consultant, provides consultancy to Y Ltd. on November 20, 2020. GST rate on this service has been  changed with effect from November 15, 2020 (before change GST was 18 per cent, new GST rate 12 per cent). The table given  below pinpoints time of supply in different situations –

Different  situations Date of issue of invoice Date of payment Time of supply (i.e., point of time to attract GST) Applicable GST rate
Situation 1 November 14, 2020 November 12, 2020 November 12, 2020 (Rule one) Old rate: 18%
Situation 2 November 14, 2020 November 16, 2020 November 16, 2020 (Rule two) New rate: 12%
Situation 3 November 16, 2020 November 14, 2020 November 16, 2020 (Rule two) New rate: 12%
Situation 4 November 14, 2020 January 1, 2019 January 1, 2021 (Rule two) New rate: 12%
Situation 5 January 14, 2021 November 14, 2020 January 14, 2021 (Rule two) New rate: 12%
Situation 6 July 1, 2020 February 1, 2021 February 1, 2021 (Rule two) New rate: 12%
Situation 7 February 1, 2021 July 1, 2020 February 1, 2021 (Rule two) New rate: 12%

Case 2 –

Suppose in the case of Situation 1 (Case 1), payment is partly (70 per cent) received on November 12, 2020 and balance  of 30 per cent is received on November 21, 2020. In such a case, GST at the old rate will be applicable on 70 per cent and the  balance 30 per cent will be subject to new GST rate.

Case 3 –

Suppose in the case of Situation 1 (Case 1), entire consideration is received by cheque on November 12, 2020  (recorded on the same day in the books of account of X Ltd. but amount is credited in its bank account on November 21, 2020).

In this case, date of receipt of payment will be deemed to be November 21, 2020 (as cheque is credited in the bank account  after 4 working days from the date of change in GST rate). Consequently, time of supply will be November 21, 2020. Supply  of goods will be taxable at the new rate of 12 per cent.

Case 4 –

Suppose in different situations covered in Case 1, invoice is issued after November 15, 2020 and payment is also  received after November 15, 2020, then the above rule of section 14 is not applicable.

Important points to be noted –

The following should be noted –

How to remember above provisions –

One can memorize the aforesaid provisions of section 14 as follows –

1.         If supply of goods/services takes place before the change in GST rate, the time of supply will be the earlier event  (i.e., date of invoice or date of payment, whichever is earlier).

2.         If supply of goods/services takes place after the change in GST rate, the time of supply will be the later event  (i.e., date of invoice or date of payment, whichever is later). However, the later event is not applicable if both the  events (i.e., issue of invoice and receipt of payment) take place before change in GST rate (in such a case, the earlier  event will be applicable).

Alternate mode to memorize above provisions –

If there is a change in GST rate, one must first determine the  following –

– Date on which goods/services are supplied.

– Date of issue of invoice.

– Date of payment.

If two or more events fall before the change in GST rate, then old rate will apply. Conversely, if two or more events  fall after the change in rate, then the new GST rate will apply.

Concession given by the Government –

Time of supply is generally determined on the basis of above parameters.  However, the Government has given a concession in the case of small taxpayers (having turnover of Rs. 1.5 crore  or less) (with effect from October 13, 2020) and in the case of all taxpayers (with effect from November 15, 2020).  After this concession, GST will not be payable at the time of advance payment (but on the basis of date of invoice)  in the case of supply of goods (no such concession is given in the case of supply of services).

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