2019-10-16 16:43:57GST CenterEnglishLiability to pay GST arises at the point of supply i.e. at place and time of supply in GST. This article talks about time of supply and...https://quickbooks.intuit.com/in/resources/in_qrc/uploads/2019/10/Time-of-Supply-in-GST.jpghttps://quickbooks.intuit.com/in/resources/gst-center/time-of-supply-in-gst/GST Basics: What is Time of Supply In GST?

GST Basics: What is Time of Supply In GST?

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Since independence, one of the greatest tax reforms in the Indian indirect taxation system has been the implementation of Goods and Services Tax (GST).

Unlike the indirect taxes in the previous regime, GST is a comprehensive tax that covers both goods and services and is collected on the value added at every stage of the supply chain. It is a destination based tax that taxes supply of goods or services at the point of consumption.

Thus, we can simply say that the liability to pay GST arises at the point of supply, that is at the time and place of supply. This is unlike the previous indirect tax regime, where the liability to pay different tax arose at different points.

For instance, in case of sales tax, the liability to pay tax arose when transfer of ownership of goods took place from the seller to the buyer. Similarly, in case of excise duty, the tax was leviable on the manufacturing of goods but was payable at the time of removal of goods from the factory.

However under GST, the point where tax is payable is not determined by the transfer of ownership status or any other criteria. Rather, such a tax is payable at the time and place where the supply is made.

Now, under any tax regime, it is important to know the date when the tax liability arises. This is so because based on that time, we would be able to calculate the rate of tax, value, and due dates for payment of taxes.

Accordingly, to guide taxation under GST, certain provisions have been laid out to determine the time of supply. Section 12 of the CGST Act lays down provisions pertaining to the time of supply of goods. And Section 13 of the Act relates to the guidelines for the time of supply of services.

Now all these provisions relating to the time of supply of goods and services broadly revolve around the following categories:

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Forward Charge Mechanism

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Under this mechanism, the supplier is registered under the GST law. Since the supplier is registered, he is the one who issues a tax invoice, collects the GST and pays it to the Government.

Reverse Charge Mechanism

Under reverse charge mechanism, the supplier is not registered under GST Law. Since the supplier is not registered, he cannot issue a tax invoice. Consequently, the recipient pays GST on the supply on behalf of the supplier, directly to the Government.

Vouchers

An instrument given as a consideration or part consideration for supplying goods or services or both, it is termed as voucher. The supplier is bound to accept the same as a consideration in return of goods or services supplied. Such an instrument displays details like terms and conditions of use, validity, goods or services covered, identity of the potential suppliers etc.

All Other Instances

These refer to all the other cases that are apart from the scenarios mentioned above.

Forward Charge Mechanism

The following graphic explains the provisions with regards to time of supply of goods in case of forward charge mechanism. Accordingly, the time of supply of goods would be the earliest of:

  • Date of Issue of Invoice
  • Due Date for Issue of Invoice
  • Date of Receipt of Payment

Now, the date of receipt of payment would be considered the earlier of:

  • Date of credit in the entity’s bank account, as displayed in the bank statement
  • Date on which payment is recorded in the books of accounts of the supplier

Now, there might be a scenario when the supplier receives excess payment up to Rs 1000. The time of supply of goods for such excess value can be taken as the date of invoice issued with respect to such excess amount.

Time of Supply of Goods

Reverse Charge Mechanism

Under “reverse charge mechanism”, the time of supply is the earliest of:

  • Date of receipt of goods
  • 30 days from the date of invoice
  • Date of payment

Now the date of payment would be considered the earlier of:

  • Date of debit in the bank account as depicted in the bank statement
  • Date of recording the payment in the books of account by the recipient

Vouchers

In case a supplier gets vouchers in lieu of supply of goods, the time of supply is determined as under:

  • The first case is the one where the supply is identifiable at the time of the issue of the voucher. The time of supply in such a scenario is taken as the date of issue of the voucher.
  • Second case relates to the one where supply is not identifiable at the time of issue of the voucher. In this scenario, date of redemption of the voucher would be taken as the time of supply.

All other instances

In case of instances other than the ones mentioned above, the time of supply is taken as:

  • Due-date for filing periodic returns or
  • In other cases, the date of payment of GST

Time of Supply of Services

The following section covers the time of supply for services under:

  • Forward Charge Mechanism
  • Reverse Charge Mechanism
  • Vouchers
  • All other instances

Forward Charge Mechanism

Under Forward Charge Mechanism, there are two scenarios that are considered to determine the place of supply of services:

1. Where Invoices Are Issued On Time

In cases where the invoice has been issued on time, the time of supply would be taken as the earlier of:

  • Date of invoice and
  • Date of receipt of payment

Now, the date of receipt of payment would be taken as the earlier of:

  • Date of credit in the bank account or
  • Date of entry in the books of account

2. Where Invoices Are Not Issued On Time

In cases where the invoice has not been issued on time, the time of supply of services shall be taken as the earlier of:

  • Date of provision of service and
  • Date of receipt of payment

Now, the date of receipt of payment shall be taken as the earlier of:

  • Date of credit in the bank account or
  • Date of entry in the books of account

Reverse Charge Mechanism

Under reverse charge mechanism, the time of supply of services shall be the earliest of:

  • 60 days from the date of issue of invoice
  • Date of payment

Now, the date of payment shall be taken as the earlier of :

  • Date of debit in the bank account as shown in the bank statement
  • Date of recording the payment in the books of accounts by the recipient

Vouchers

In case a supplier gets vouchers in lieu of supply of services, the time of supply is determined as under:

  • The first case is the one where the supply is identifiable at the time of the issue of the voucher. The time of supply in such a scenario is taken as the date of issue of the voucher.
  • Second case relates to the one where supply is not identifiable at the time of issue of the voucher and all the other cases. In such scenarios, date of redemption of the voucher would be taken as the time of supply.

All Other Instances

In case of instances other than the ones mentioned above, the time of supply in case of services is taken as:

  • Due-date for filing periodic returns or
  • In other cases, the date of payment of GST

Time of Supply In Case Rate Of Tax Changes

The provisions regarding change in the rate of tax with regards to goods or services are defined in section 14 of the CGST Act.

There are two scenarios under this. The first scenario deals with the one where goods or services have been supplied before the change in the rate of tax. And the second scenario deals with the one where goods or services have been supplied after the change in the rate of tax.

Supply of Goods or Services After Change in The Rate of Tax

  • The first case relates to the one where invoice is issued and the payment is received after the change in rate of tax. In such a case, the time of supply shall be the date of receipt of payment or the date of issue of invoice, whichever is earlier.
  • Next case relates to the one where invoice is issued prior to the change in rate of tax. But payment is received after the change in rate of tax. In such a case, the time of supply shall be the date of issue of invoice;
  • Lastly, there are cases where payment is received before the change in rate of tax. But the invoice for the same is issued after the change in rate of tax. In such a case, the time of supply shall be the date of receipt of payment.

Supply of Goods or Services Before Change in The Rate of Tax

  • There are cases where payment is received after the change in rate of tax. But the invoice is issued prior to the change in rate of tax. In such a case, the time of supply shall be the date of receipt of payment
  • The, there are also times when invoice is issued and payment is received before the change in rate of tax. In such cases, the time of supply shall be the date of receipt of payment or date of issue of invoice, whichever is earlier.
  • Lastly, there are also cases where invoice is issued after the change in rate of tax. But the payment is received before the change in rate of tax. In such cases, the time of supply shall be the date of issue of invoice. Provided that the date of receipt of payment shall be the date of credit in the bank account. This happens only if such credit in the bank account is after four working days from the date of change in the rate of tax.
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Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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