Time of Supply Under GST: To calculate your tax liability under the Goods and Services Tax (GST) system, it’s crucial to know when the tax liability arises, which is referred to as the “Time of Supply” in GST law. GST law provides distinct provisions to determine the time of supply for goods and services under Sections 12, 13, and 14 of the CGST Act 2017. In the GST regime, unlike in previous indirect taxation systems, the taxable event is the supply of goods or services, not just the sale or removal of goods. Therefore, let’s delve into the intricacies of how the time of taxation works under the GST regime.
Time of Supply for Goods
Default Rule
The time of supply for goods is determined as the earlier of the following:
(a) The date of issuing the invoice or the last day by which the invoice should have been issued.
(b) The date of receipt of payment.
Note-1: The date of receipt of payment is the earlier of the date entered in the books of accounts or the date when the payment is credited to the bank account.
Note-2: The last date by which the invoice should have been issued is the “date of removal of goods.”
Time of Supply for Goods under the Composition Scheme
For suppliers under the composition scheme, the time of supply for goods is the date of the invoice. This rule applies if the turnover is up to 1.5 Crore, regardless of whether the supplier opted for the composition scheme.
In cases involving the movement of goods, the time of supply is the date of the invoice issued at the time of goods’ removal.
In all other cases, the time of supply is the date of delivery of goods.
Time of Supply for Excess Amount Received Over the Invoice
The time of supply for the excess amount received over the amount mentioned in the invoice is either the date of issue of the invoice or the date of receipt of payment, as preferred by the supplier.
Time of Supply for Continuous Supply of Goods
In cases of continuous supply of goods, the time of supply is the “time when each statement is issued” or the “time when each payment is received,” whichever occurs earlier.
Time of Supply for Goods Sent on Approval Basis
Goods sent on approval basis are now treated as deemed supply in the GST regime and accordingly it is taxable if the recipient fails to return the goods within a stipulated time period. The time of supply for goods sent on approval basis is the “time when it becomes known that supply has taken place” or “six months from the date of removal of goods,” whichever is earlier.
Time of Supply for Goods under Reverse Charge Mechanism (RCM)
The time of supply for goods taxable under the reverse charge mechanism is the earlier of the following three dates:
(a) Date of receipt of goods.
(b) Date of receipt of payment.
(c) Date immediately following 30 days from the date of issue of the invoice.
If the time of supply cannot be determined using the above provisions, it defaults to the date when the entry is made in the recipient’s books of accounts.
Time of Supply for Services
Default Rule
If the invoice is issued within 30 days from the date of service supply (45 days for banks/NBFCs/insurance companies), the time of supply for services is the “date of issue of the invoice” or the “date on which the supplier receives the payment,” whichever is earlier.
If the invoice is issued after 30 days/45 days (as mentioned above), the time of supply is the “date of provision of service” or the “date on which the supplier receives the payment,” whichever is earlier.
Time of Supply for Services under Reverse Charge Mechanism (RCM)
For services supplied by Indian-based service providers, the time of supply is the “date of receipt of payment” or the “date immediately following 60 days from the date of issue of the invoice,” whichever is earlier.
For services supplied by foreign-based service providers (associated enterprises), the time of supply is the “date of entry of service in the books of account of the recipient” or the “date of receipt of payment,” whichever is earlier.
If the time of supply for services cannot be determined using the above provisions, it defaults to the date when the entry is made in the recipient’s books of accounts.
Time of Supply for Goods/Services (Common Rules)
Time of Supply for Vouchers for Goods & Services
If the supply is identifiable at the point of issuing the voucher, the time of supply is the “date of issue of the voucher.”
If the supply is not identifiable at the point of issuing the voucher, the time of supply is the “date of redemption of the voucher.”
Time of Supply for Goods or Services with Interest, Late Fees, or Penalty
In cases where the value of supply includes interest, late fees, or penalty, the time of supply is the “date on which that interest/late fees/penalty is received by the supplier.”
Time of Supply for Construction Projects (Commencing after 1.4.19)
Under the Goods and Services Tax (GST) regime, certain conditions apply to the supply of Transferable Development Rights (TDR), Floor Space Index (FSI), and long-term leases (premium) of land by a landowner to a developer. These conditions are essential to determine the tax liability associated with these transactions:
Exemption with Conditions: TDR, FSI, and long-term leases (premium) of land are initially exempted from GST. However, this exemption is subject to the condition that the constructed flats must be sold before the issuance of the completion certificate, and tax must be paid on these flats.
Withdrawal of Exemption: If the constructed flats are sold after the issuance of the completion certificate, the exemption on TDR, FSI, and long-term leases will be withdrawn. However, this withdrawal is subject to certain limits:
For affordable housing projects, the withdrawal is limited to 1% of the project’s value. For projects other than affordable housing, the withdrawal is limited to 5% of the project’s value.
Shift in Tax Liability: The responsibility to pay GST on TDR, FSI, and long-term leases (premium) is transferred from the landowner to the builder under the Reverse Charge Mechanism (RCM).
In the context of these taxation provisions, the time of supply for TDR, FSI, and long-term leases (premium) of land under RCM, in cases where flats are sold after the completion certificate, will be determined based on the following criteria:
Date of Issue of Completion Certificate: If the completion certificate is issued, the time of supply will be the date on which the completion certificate is issued.
First Occupation of the Project: Alternatively, if the completion certificate has not been issued but the project’s flats are occupied by the first occupants, the time of supply will be the date of the first occupation of the project.
Similarly, in cases where a builder is liable to pay GST on the construction of houses provided to a landowner through a Joint Development Agreement (JDA), the time of supply will be determined based on the same criteria:
Date of Completion of the Project: If the construction project is completed, the time of supply will be the date of project completion.
First Occupation of the Project: Alternatively, if the project is not yet completed but the first occupants move in, the time of supply will be the date of the first occupation of the project.
Time of Supply for Rate Changes in Goods or Services
|
Case |
Supply completed before date of change in tax rate | Invoice issued before the date of change in tax rate | Payment received before the date of change in tax rate |
Time of supply |
| 1 | Yes | No | No | Earliest of the date of invoice or payment |
| 2 | Yes | Yes | No | Date of issue of invoice |
| 3 | Yes | No | Yes | Date of receipt of payment |
| 4 | No | Yes | Yes | Earliest of the date of invoice or payment |
| 5 | No | Yes | No | Date of receipt of payment |
| 6 | No | No | Yes | Date of issue of Invoice |
Note: Date of receipt of payment in case of change in rate of tax:
(a) If the amount is credited to the bank account within 4 working days from the date of such change: Date of book entry or date of bank entry, whichever is earlier.
(b) If the amount is credited to the bank account after 4 working days from the date of such change: Date of bank entry.
Time of Supply for Goods/Services (Residual Provisions)
If it’s not possible to determine the time of supply under any of the aforementioned provisions, the time of supply is decided as follows:
For cases requiring periodic return filing, the time of supply is the due date of filing the return.
In all other cases, the time of supply for goods/services is the date of payment of tax.
Conclusion: Understanding Time of Supply under GST- A comprehensive Analysis
In the GST regime, the taxable event is the supply of goods or services, and the tax collection event occurs at the earliest of the dates discussed under different provisions. This reflects the government’s intent to collect tax promptly. Given the multiple parameters for determining the time of supply, businesses and GST professionals must have a clear understanding of these provisions to effectively manage and reconcile tax records with financials.
For more details about Time of Supply, you may follow this official link of CBIC-https://old.cbic.gov.in/resources//htdocs-cbec/gst/Time%20of%20supply%20in%20GST.pdf
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