Concept of Time of supply under GST PART-I
- Under the provisions of GST Laws, the taxability of a transaction depends on the fact if the supply of goods or services or both has taken place. Besides if it contains all the essential factors such as “furtherance of business”, “for a consideration”. The taxability of a transaction is derived on the existence of the above. Once the taxability is established, the immediate question arises as to when the tax can be legitimately collected from the tax payers. In the pre-gst regime, there the point of collection of tax was different under various laws. Under the Sales tax/VAT, the liability of tax was due as soon as “sale of goods” took place. As far as provisions of “Central Excise” are concerned the duty was payable at the time of “removal of goods from factory”. Under the “Service tax” there existed “Point of taxation rules” from the year 2011 up to the date of introduction of GST Laws. As per the said rules the point in time of a transaction was held as “point of taxation” according to which the liability to pay the tax was determined. Prior to year 2011, service tax was payable on “receipt basis”. That is to say tax was payable only on receipt of consideration from the recipient of services. Over the years a common point observed under all the taxes was that, there was an attempt made by some taxpayers to defer the payment of tax liability. Although there was not a situation of “no collection of tax”, but certainly there was a case of “deferred collection of tax”. The deferred collection sometimes also unfortunately used to get converted into “no collection at all”.
- Under “self-assessment” the registered person/tax payer is entitled to determine the liability in terms of taxable value and tax rate, however when it comes to deciding upon the point in time when the tax payment is due, the same is not left to be decided by the tax payer but is mentioned in the GST laws. Thus it can be observed that, while the consolidation of all the taxes of pre-gst era was in progress during the introduction of GST laws, a mechanism of effective and timely tax collection was also necessary. The provisions of “Time of supply” have been incorporated under the GST laws for the very same purpose. Thus it would be important to note that the provisions of “Time of supply”, would direct as to when the tax is to be paid in respect of a transaction of “Supply of goods” or “Supply of Services”.
Time of Supply of Goods:
- (1) 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) The time of supply of goods 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 1[***]1 section 31, 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:
Provided that where the supplier of taxable goods receives an amount up to one thousand rupees in excess of the amount indicated in the tax invoice, the time of supply to the extent of such excess amount shall, at the option of the said supplier, be the date of issue of invoice in respect of such excess amount.
The applicability of provisions of this section was modified with effect from 15/11/2017, vide notification 66/2017. Thus the liability to pay tax on supply of goods shall be on the basis of “date of invoice”, where the invoice is issued in terms of section 31 of the CGST Act 2017. It would be pertinent to note that in respect of supply of goods, the time of supply would be the date of invoice.
Eg: A ltd has supplied goods by issuing invoice on 04/07/2019, and the goods were dispatched on the same day. In such case the “Time of supply” will be 04/07/2019 and the due date of paying tax in respect of such supply would be 20th August 2019.
Explanation 1.- For the purposes of clauses (a) and (b), "supply" shall be deemed to have been made to the extent it is covered by the invoice or, as the case may be, the payment.
Explanation 2.- For the purposes of clause (b), "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 paym3ent is credited to his bank account, whichever is earlier.
- (3) 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 thirty days from the date of issue of invoice or any other document, by whatever name called, in lieu thereof by the supplier
- Provided that 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.
- Where tax is liable to be paid on reverse charge basis, in respect of goods procured, the time of supply is determined on above basis. The provisions of this sub-section are applicable in case of inward supplies liable to reverse charge mechanism under Section 9(3) of the CGST Act 2017 or 5(3) of the IGST Act 2017. Eg in case of procurement of notified goods vide notification 4/2017, dated 28th June 2017 (cashew nuts, Bidi wrapper leaves etc).
Eg: Consignment of cashew nuts was received on 05/07/2019, the payment was made to the vendor by issuing a cheque on 28/06/2019 and the same was debited in the bank account on 3/07/2019. The date of vendor invoice was also 05/07/2019. In such case the time of supply will be earlier of the following.
- a. The date of receipt of goods ie 05/07/2019.
- b. The date of entry of payment in books ie 28/06/2019 or date of debit entry in books of account ie 05/07/2019 whichever is earlier ie 28/06/2019.
- c. Date immediately following 30 days from invoice issue ie 06/08/2019.
- Thus in the above case, the “Time of supply” would be 28/06/2019 and due date of payment of tax would be 20th July 2019.
(4) In case of supply of vouchers by a supplier, the time of supply shall be-
- (a) the date of issue of voucher, if the supply is identifiable at that point; or
- (b) the date of redemption of voucher, in all other cases.
Eg: Issue of voucher where supply is identifiable.
Sujay sales is a company engaged in supply of electronic goods. Sujay sales has issued a voucher worth Rs 25000 on 25/07/2019 which can be redeemed against a specific TV product “Sony Bravia 21inch TV model2255” within 2 months from the date of issue. The said voucher was actually redeemed on 12/08/2019 by the beneficiary of the voucher. In the given case since the supply was identifiable at the time of issuance of voucher ie on 25/07/2019 the time of supply for Sujay sales in respect of the mentioned model of TV would be 25/07/2019 and the tax in respect of said transaction would be payable on 20/08/2019.
Eg: Issue of voucher where supply is not identifiable.
Sujay sales, a company engaged in supply of electronic goods, offers for sales “value gift vouchers” ranging from Rs 1001 to Rs 51000. A voucher worth Rs 11000 was issued on 12/08/2019 with a validity of 3 months. The voucher was actually redeemed on 29/08/2019. In such case the time of supply would be the date on which the voucher is redeemed ie 29/08/2019 but not the date on which it was issued ie 12/08/2019.
(5) Where it is not possible to determine the time of supply under the provisions of sub-section (2) or sub-section (3) or sub-section (4), the time of supply shall-
- (a) in a case where a periodical return has to be filed, be the date on which such return is to be filed; or
- (b) in any other case, be the date on which the tax is paid.
(6) 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.
Eg: Supply by way of sale of goods was made by A Ltd on 03/09/2019. The value of supply was Rs 75000 and also GST was levied @ 18%. Invoice was issued on the same date thus as per the provisions of Section 12(1)(a) above the time of supply was 03/09/2019. The terms of sale of goods was payment within 30 days, however if the payment was not made in 30 days, late fees would be applicable @ 100 Rs per day. The actual payment was made on 28/10/2019. Thus there was a delay of 25 days. Thus an additional amount of Rs 2500 (25days * Rs 100 per day) became due and the same was recovered on 28/10/2019. In such case the time of supply in respect of the additionally recovered amount of Rs 2500 will be 28/10/2019 and the tax in respect of such transaction would be due on 20/11/2019.
We have discussed the “Time of Supply of Goods” in this write up. In the next part we shall discuss the provisions of “Time of Supply of Services”.
CA Aumkar Gadgil
- Disclaimer:The views provided above are on the basis of our understanding of the GST Laws, Rules and Regulations. The adjudicating or Judicial Authorities may or may not agree with the views expressed above