In this article we will be discussing the time of supply concept in the context of GST and how it is applicable.
The time of supply of goods and services is one of the most vital factors that must be taken into account in the calculation of the goods and services tax. The CGST Act has provided the various provisions that will govern the mechanism for calculation as well as payment of GST.
GST Time Of Supply Of Goods
The point of taxation is the point in time when goods have been considered to be supplied or the services have been considered to be provided. The point of taxation permits us to determine the rate of the tax, value, and the due dates for the payment of taxes.
Under GST, the point of taxation, that is, the liability to pay the CGST / SGST, will arise at the time of supply as determined for the goods and services. There are separate provisions for the GST Time Of Supply Of Goods and the GST time of supply for services
How To Determine The GST Time Of Supply Of Goods
The GST Time Of Supply Of Goods has to be the earlier of the following dates –
(a) The date of issuing of invoice (or the last day by which the invoice should have been issued)
(b) The date of receipt of the payment
If a supplier receives an amount up to Rs. 1000 in excess of the invoice amount then, the time of supply for the extra amount will be the date of issue of the invoice (at the choice of the supplier).
For (a) and (b) – The supply will be assumed to be made to the point where it is covered by the invoice or the payment (as the case may be).
For (b) – the date of receipt of the payment will be earlier of
The date on which the payment was entered in the books
OR
The date on which payment is credited in to his bank account
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For example:
(a) The date of invoice 15th May 2018
(b) the date of receipt of payment 10th July 2018
(c) the date when the supplier recorded the receipt in books 11th July 2018
Time of supply shall be 15th May 2018
The GST Time Of Supply Of Goods Under GST Reverse Charge
Reverse charge is the liability to pay the tax by the recipient of goods/services instead of the supplier. In a scenario where reverse charge is applicable, the time of supply will be the earliest of the following dates—
- Date of receipt of the goods OR
- Date of the payment OR
- Date immediately after THIRTY days from the date of issue of the invoice by the supplier (60 days in case of services)
If the GST Time Of Supply Of Goods is not possible to determine under (a), (b) or (c), then the time of supply will be the date of entry in the account books of the recipient.
For clause (b) – the date of payment will be earlier of-
Date on which the recipient entered the payment in the books
OR
Date on which the payment gets debited from his bank account
For example:
- The date of receipt of goods 15th May 2018
- The date of payment 15th July 2018
- The date of invoice 1st June 2018
- The date of entry in books of the receiver 18th May 2018
The time of supply of goods 15th May 2018
If for some reason the time of supply couldn’t be determined supply under (a), (b) or (c) then it will be 18th May 2018 i.e., date of entry
Time of supply under normal charge
The time of supply for goods under normal charge is determined by the earlier of the following dates:
(a) The date of issuing the invoice or the last day by which the invoice should have been issued.
OR
(b) The date of receipt of payment.
Here are some additional notes and considerations regarding the time of supply:
Excess Payment: If the supplier receives an amount up to Rs.1,000 in excess of the invoice amount, the time of supply for the extra amount shall be the date of issue of the invoice (at the option of the supplier).
Supply Coverage: For both (a) and (b), the supply is assumed to have been made to the extent it is covered by the invoice or the payment, as the case may be.
Date of Receipt of Payment: For (b), the date of receipt of payment is determined by the earlier of:
The date on which the supplier entered the payment in their books
The date on which the payment is credited to the supplier’s bank account
Example:
Let’s illustrate the concept with an example:
(a) Date of invoice: 15th May 2021
(b) Date of receipt of payment: 10th July 2021
(c) Date when the supplier recorded the receipt in books: 11th July 2021
In this case, the time of supply will be 15th May 2021, as it is the earlier of the two dates (the date of the invoice).
When the time of supply cannot be determined
When it’s not possible to determine the time of supply through the provisions mentioned earlier, the time of supply will be determined as follows:
(a) The date on which a periodical return has to be filed.
OR
(b) The date on which the Central Goods and Services Tax (CGST) or State Goods and Services Tax (SGST) is paid, in any other case.
The GST Time Of Supply Of Goods For Vouchers
In case of the supply of vouchers the time of supply is-
- The date of issue of the voucher, if the supply can be identified at the particular point OR
- The date of redemption of the voucher, in all other cases;
When the time of supply cannot be determined
If the time of supply cannot be determined by the above provisions, then it will be-
The date on which a periodical return has to be filed
Or
The date on which the CGST/SGST was paid, in any other case.
In the GST regime, the tax collection event will be the earliest of the dates as given above. Various events like the issuing of the invoice/making of payment in case of supply of goods /services or the completion of an event-in case of supply of service triggering the tax levy, confirms that the Government wants to ensure the tax is collected at the earliest point of time.
FAQs
How is the time of supply determined when there is a continuous supply of goods?
The time of supply for a continuous supply of goods is determined based on the earlier of the following events: date of issue of invoice, last date on which the invoice should have been issued, and date of receipt of payment.
What are the exceptions to the general rule for the time of supply of goods under GST?
There are certain exceptions to the general rule for the time of supply of goods under GST. For example, in the case of changes in the tax rate, the time of supply is determined based on the date of receipt of payment.
How does the time of supply affect input tax credit claims?
The time of supply is an important factor in determining the eligibility of input tax credit (ITC) claims. The buyer of the goods who is claiming the ITC must make the complete payment to the supplier within 180 days from the date of supply in order to claim the ITC. The time limit to claim ITC against an invoice or debit note is earlier of two dates, which are the due date of GST return filing for the month of September of the next financial year or the date of filing annual return for that financial year.
In the case of changes to the tax rate, how is the time of supply of goods determined under GST?
In the case of changes in the tax rate, the time of supply is determined based on the date of receipt of payment.
What is the significance of determining the correct time of supply under the GST regime?
Determining the correct time of supply is important for businesses to comply with GST regulations and claim input tax credits. It helps businesses identify the due date for payment of taxes and avoid penalties for non-compliance.
How is the time of supply for goods determined in the case of stock transfers?
The time of supply for goods in the case of stock transfers is the date on which the goods are removed from the place of business for delivery to the recipient.
When is the time of supply in case of goods sent on approval or return basis?
The time of supply for goods sent on approval or return basis is determined based on the earlier of the following events: date of issue of invoice, date of receipt of goods by the recipient, and date of receipt of payment.
Are there penalties for not adhering to the time of supply provisions under the GST Act?
Yes, there are penalties for not adhering to the time of supply provisions under the GST Act. The penalty for late payment of tax is 18% per annum.
How is the time of supply related to GST return filing and payment?
The time of supply is an important factor in determining the due date for payment of taxes and filing of GST returns. The GST-registered business will need to apply the time of supply rules to know when supplies are treated as made for GST purposes.
What are the challenges faced by businesses in determining the time of supply of goods under GST?
Businesses face challenges in determining the time of supply of goods under GST due to the complexity of the rules and the need to track events such as the date of issue of invoice, date of receipt of payment, and date of receipt of goods by the recipient.
Is RCM applicable to all types of goods and services or are there specific categories?
RCM (Reverse Charge Mechanism) is applicable to specific categories of goods and services. For example, RCM is applicable to goods and services purchased from an unregistered dealer.
Conclusion
This will be a completely new concept for the current VAT and the Central Excise taxpayers.
There are multiple parameters in determining the GST Time Of Supply Of Goods. Hence, it will be quite a task for businesses in maintaining and reconciling between the revenue as per financials and as per GST. After the implementation of the Goods and Services Tax, many businesses have faced problems in determining the exact time of supply of goods and services. There is some confusion about the overall scheme of things but you must handle it with the guidance of expert tax advisors and attorneys. If you have any other queries with regard to GST or any other tax related matters, get in touch with us and we will connect you to our team of tax experts to resolve your concerns.
