TIME OF SUPPLY

Time of Suppy in GST

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

Time of Suppy for Goods:

The time of supply for goods is the earliest of the following:

  • Date of issue of invoice by the supplier. If invoice is not issued, then the last date on which supplier is legally bound to issue the invoice with respect to the supply.

  • Date on which supplier receives the payment.

Time of Suppy for Services:

The time of supply for services is the earliest of the following:

  • If the invoice is issued within the legally prescribed period under section 31(2) of the CGST Act, 2017 read with Rule 47 of CGST Rules, 2017 (which is thirty days from the date of the supply of service), then the date of issue of invoice by the supplier or date of receipt of payment, which ever is earlier.

  • If the invoice is not issued within the legally prescribed period under section 31(2) of the CGST Act, 2017 then the date of provision of service or date of receipt of payment, whichever is earlier.

  • Date on which recipient shows the receipt of service in his books of account, in a case aforesaid two provisions do not apply.

Point of time when supplier receives the payment or date of receipt of payment:

The phrase “the date on which supplier receives the payment” or “the date of receipt of payment” means the date on which payment is entered in books of accounts of the supplier or the date on which the payment is credited to his bank account, whichever is earlier.

Time of issue of invoice for supply:

As per section 31 of the CGST Act, 2017 an invoice for supply of goods needs to be issued before or at the time of removal of goods for supply to the recipient where the supply involves movement of goods. However, in other cases, invoice needs to be issued before or at the time of delivery of goods or making available goods to the recipient.

Similarly, an invoice for supply of services needs to be issued before or after the provision of service but not later than thirty days from the date of provision of service.

In respect of supply of goods by normal registered persons (other than composition dealers), the time of supply will be the issue of invoice (or the last date by which invoice has to be issued in terms of Section 31) Therefore, all taxpayers (except composition taxpayers) are exempted from paying GST at the time of receipt of advance in relation to supply of goods. The entire GST shall be payable only when the invoice is issued for such supply of goods.

The supply of services shall deemed to have been made to the extent it is covered by the invoice or by the payment, as the case may be. For example, Firm ‘A’ receives an advance of Rs. 2500/- on 29.07.2021 for provision ofservices worth Rs. 10000/- to be supplied in the month of September, then it is deemed that firm ‘A’ has made a supply of Rs. 2500/- on 29.07.2021 and tax liability on Rs. 2500/- is to be discharged by 20.08.2021.

Although tax is payable on any advance received for a supply of services, however for the convenience of trade it is provided that if a supplier of taxable services receives an amount up to Rs. 1000/- in excess of the amount indicated on the tax invoice, then the supplier has an option to take the date of issue of invoice in respect of such supply as time of supply. For example, if a supplier has received an amount of Rs. 1500/- against an invoice of Rs.1100/- on 25.07.2021 and date of invoice of next supply to the said recipient is 14.08.2021, then he has option to treat the time of supply w.r.t Rs. 400/- either as 25.07.2021 or 14.08.2021.

Time of supply of goods when tax is to be paid on reverse charge basis:

The time of supply of of goods when tax is to be paid on reverse charge basis is the earliest of the following:

  • Date of receipt of goods

  • Date on which payment is entered in the books of accounts of the recipient or the date on which the payment is debited in his bank account, whichever is earlier

  • Date immediately following 30 days from the date of issue of invoice or any other legal document in lieu of invoice by the supplier.

However, if it is not possible to determine the time of supply in aforesaid manner then the time of supply is the date of entry of the transaction in the books of accounts of the recipient of supply.

Time of supply of services when tax is to be paid on reverse charge basis:

The time of supply of of services when tax is to be paid on reverse charge basis is the earliest of the following:

  • 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.

  • Date immediately following 60 days from the date of issue of invoice or any other legal document in lieu of invoice by the supplier.

However, if it is not possible to determine the time of supply in aforesaid manner then the time of supply is the date of entry of the transaction in the books of accounts of the recipient of supply.

Time of supply of services in case of supply by Associated Enterprises located outside India:

In this case, the time of supply is the date of entry in the books of account of the recipient or the date of payment, whichever is earlier.

Time of supply in case of supply of vouchers:

Time of supply in the case of single purpose voucher i.e. case where supply is identifiable at the time of issuance of voucher is date of issue of voucher. However, in all other cases of supply of vouchers, time of supply is date of redemption of voucher.

What is Voucher:

Voucher has been defined in the CGST Act, 2017 as 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.

Vouchers are commonly used for transaction in the Indian economy. A shopkeeper may issue vouchers for specific supply i.e. supply is identifiable at the time of issuance of voucher. In trade parlance, these are known as single purpose vouchers.

For example, vouchers for pressure cookers or Television or for spa or haircut. Similarly, a voucher can be general purpose voucher which can be used for multiple purposes. For example, a Rs. 1000/- voucher issued by Shoppers’ Stop store can be used for buying any product at any Shoppes’ Stop store. Time of supply is different in case of single purpose voucher and in the case of general purpose voucher.

Time of Supply in case of Change in Rate of Tax:

Where there is a change in rate of tax of supply of goods or services, time of supply has to be determined in the following manner:

Supply is completed before the change in rate of tax:

Invoice issued before date of change in tax rate Payment received before date of change in tax rate Time of supply Applicable rate of tax
No No earliest of the date of invoice or payment New rate of tax
Yes No Date of issue of invoice Old tax rate
No Yes Date of receipt of payment Old tax rate

Supply is completed after the change in rate of tax:

Invoice issued before date of change in tax rate Payment received before date of change in tax rate Time of supply Applicable rate of tax
Yes Yes earliest of the date of invoice or payment Old rate of tax
Yes No Date of receipt of payment New rate of tax
No Yes Date of issue of invoice New rate of tax

Date of receipt of Payment in case of change in rate of tax:

Normally the date of receipt of payment is the date of credit in the bank account of the recipient of payment or the date on which the payment is entered into his books of account, whichever is earlier. Further, the date of credit in the bank account is relevant if such credit is after four working days from the date of change in rate of tax.

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