Concept of Time of supply under GST PART-II
- In the Part-I, we discussed the applicability of provisions of Time of Supply specifically in respect of supply of goods. In this part we will continue the discussion on “Time of Supply” but specifically in respect of “supply of services”. The determination of time of supply in respect of services is slightly a lengthier process than that in case of supply of goods. Primarily there are three identifiable events which will exist in case of supply of services.
1. Date of completion of service/Date of completion of event (in case of continuous supply of services):
- There is no specific parameter laid down in the GST Laws as how to determine date of completion of service. Thus from every case to case basis the same differs. Therefore the tax payer needs to establish from the contract of service as to when can he particularly identify the “completion of service”.
2. Date of issuance of Invoice:
- The provisions of section 31 of the CGST Act 2017 and the rules of Invoice as per the CGST Rules 2017, mentions the point in time when the invoice is required to be issued in respect of “supply of service”. The date on which invoice is actually issued should ideally be as per the provisions of Section 31 and the rules relating thereto. The date on which invoice will actually be issued in respect of a service provided/agreed to be provided, is called the date of issuance of invoice.
3. Date of payment in respect of services:
- The third possible event in respect of services provided or agreed to be provided is “date of payment”. The payment can be either in cash or real time settlement modes. Or the payment may be by way of banker’s cheque, the date may be date of credit in bank account or may be the date of entry in books of account, whichever is earlier needs to be considered.
- In determining the time of supply, the earlier of the three above dates is considered as “Time of supply of services”.
The provisions of “Time of Supply”
- As per provisions of Section 13(2) of the CGST Act 2017, 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 (30 days generally and 45 days in case of Banking and financial services) or the date of receipt of payment, whichever is earlier;
- (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
- On the basis of clause (a) above the time of supply is primarily determined on the basis of “date of invoice”. Provided the invoice is issued in the due time of (30 days or 45 days).
Sr No Date of completion of service Date of issuance of Invoice Date of payment Time of Supply Due date of tax payment 1 03/09/2019 27/09/2019 15/10/2019 03/09/2019 20/10/2019 2 03/09/2019 12/10/2019 27/10/2019 03/09/2019 20/10/2019 3 03/09/2019 15/10/2019 27/08/2019 27/08/2019 20/09/2019 4 03/09/2019 29/09/2019 27/08/2019-50%
- Let us understand the determination of time of supply in above case. In the process of determining the time of supply first the emphasis is on the date of “issuance of invoice” however only if the invoice is issued within the due time of (30/45 days) as mentioned above. If the same is not issued then the date of completion of service becomes relevant to be considered. So once either of the date is selected (date of invoice/completion of service), subsequently the date of payment needs to be considered. Thus whichever is the selected date, (invoice/completion) and compared with date of payment, earlier of these dates is considered as the “Time of supply of services”. In each of the case above the same determination criteria has been followed.
- (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.
- Provided that where the supplier of taxable service 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 relating to such excess amount.
- In the service industry, it is probable that there are transactions in which there is a possibility of receiving some amount of money in excess than that of the actual amount for which the service was rendered. In such case, the question arises is, on payment of the excess amount, is GST payable? Considering the fact that the amount is received in advance? As per the proviso, it would be pertinent to note that in case of receipt of amount upto Rs 1000 in excess, there need not be any GST paid.
- Eg: Mr Surendra has received a telephone bill of Rs 3600 (including GST@18%), for the month of August 2019. As a matter of practice he decides to pay the bill to the nearest figure of thousands. He makes the payment of Rs 4000 on 20th September 2019. In such case the telephone services were actually provided for an amount on which GST was levied and the bill was issued accordingly. However the telephone company has received Rs 400 in excess of the bill amount. In such case as per the above proviso, the telephone company need not pay GST on the excess amount of Rs 400 immediately, but can adjust the same against subsequent services to be provided.
Explanation.––For the purposes of clauses (a) and (b)––
- (i) the 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;
- (ii) “the date of receipt of payment” shall be the date on which the payment is entered in the books of account of the supplier or the date on which the payment 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 earlier of the following dates, namely
- (a) 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
- (b) 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
- Eg: Sairaj Garments Mumbai imports services from XLC LLC USA. The services are in respect of “Garments manufacturing technological support services”. Invoice was immediately raised by XLC LLC on 02/09/2019. However the payment terms were 3 months after the date of Invoice. Accordingly the payment was debited to the books on 02/12/2019, however the actual remittance was made on 05/12/2019.
- Applying the provisions of Section 13(3)(a)/(b), the time of supply will be earlier of the following.
- a. Date on which payment is entered in books (02/12/2019) or the date on which payment was debited to bank account (05/12/2019) whichever is earlier ie 02/12/2019. OR
- b. Date immediately, following 60 days from the date of issuance of invoice or any other tax document. In this case the invoice date is 02/09/2019 thus the immediate date after end of 60 days would be 1/11/2019.
- Thus considering earlier of (a) and (b) above, the time of supply would be 1/11/2019 and the tax in respect of the same needs to be paid by 20/12/2019.
- Provided that where it is not possible to determine the time of supply under clause (a) or clause (b), the time of supply shall be the date of entry in the books of account of the recipient of supply.
Provisions in case of Associated Enterprises:
- Provided further that in case of supply by associated enterprises, where the supplier of service is located outside India, the time of supply shall be the date of entry in the books of account of the recipient of supply or the date of payment, whichever is earlier.
- (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.
“Thuko sai” a service provider engaged in provision of “Spa” services issues two type of gift vouchers. One is a “value voucher” which can be redeemed against any of the multiple services provided by them. Other voucher is a service specific voucher which is issued against a specific/predefined type of spa services.
- a. Mr Vihaan has purchased a value voucher worth Rs 2500 on 15/09/2019 and has gifted the same to his friend Abhishek. Mr Abhishek has redeemed the voucher against a “gold package spa service” on 17/10/2019. The type of “spa service” was not known at the time of issuance of such value voucher. Thus in such case, as per provisions of Section 13(4)(b), the “Time of supply”, in respect of voucher would be 17/10/2019 as the supply was not identifiable at the time of issuance of voucher.
- b. Ms Madhushree has purchased a “Ayurvedic spa package” of Rs 1500 and gifted the same to her friend Harsha on 05/03/2019. The voucher was actually redeemed by Ms Harsha on 28/03/2019. In such case, as per the provisions of Section 13(4)(a), the “Time of supply” will be 05/03/2019 as the service was identifiable at the time of issuance of voucher.
- (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.
- Ms Prachi proprietor of “PSG Consultancy” has issued an invoice to Y Ltd of Rs 1,00,000 + GST @ 18% in respect of Financial consultancy services rendered on 02/09/2019. The payment was also duly made in respect of the said invoice. During the month of September there were negotiations going on in respect of revision of the invoice value and the same was agreed by Y Ltd on 15/11/2019. The incremental value of Rs 10,000 + GST @ 18% was agreed. Accordingly, “PSG Consultancy” issued a debit note in the month of November 2019. Although the said debit note related to the invoice which was actually issued in the month of September 2019, the “Time of supply” in respect of the said debit note would be 15/11/2019 as per the provisions of Section 13(6).
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