2019-12-01 20:55:42GST CenterEnglishThe liability to pay GST arises at the time of supply of goods or services. This article talks about the provisions relating to the time of...https://quickbooks.intuit.com/in/resources/in_qrc/uploads/2019/12/What-is-Time-of-Supply-of-Goods.jpghttps://quickbooks.intuit.com/in/resources/gst-center/time-of-supply-of-goods/What is Time of Supply of Goods Under GST?

What is Time of Supply of Goods Under GST?

10 min read

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.


Try QuickBooks Invoicing & Accounting Software – 30 Days Free Trial.

What is Time of Supply?

[/vc_column_text]

The liability to pay tax under GST arises at the time of supply of goods. This is to say that the point of taxation under GST is the point in time when goods or services have been deemed to be supplied.

Thus, such a point in time under GST determines the rate of tax, value as well as due dates for payment of taxes.

This article talks about the provisions relating to the time of supply of goods. However, these provisions regarding time of supply revolve around four categories:

Time of Supply of Goods

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

However, these provisions must be contemplated taking into consideration the following points:

The Invoice must be issued:

  • On or before the time of removal of goods. This is in cases where supply involves movement of goods.
  • On or before delivery of goods to the recipient. This should happen where supply does not involve any movement of goods.
  • On or before issuance of statement of account. This should take place in cases where there is a continuous supply of goods.
  • On or before the time of supply subject to a maximum of 6 months from the date of removal, whichever is earlier. This occurs in cases where goods are supplied on “approval for sale or return” basis.

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
  • The 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.

Illustration

Vipul Ltd. supplied goods to Sharma Ltd. The terms of the contract stipulated that goods are delivered to the factory of Sharma Ltd. Goods were removed from the factory of Vipul Ltd. on September 9th, 2018 and were delivered to the factory of Sharma Ltd. on September 15th, 2018.

Now, the invoice was issued on September 18th, 2018 and payment was credited to Vipul Ltd’s account on October 20th, 2018. However, the entry was made in the books when the cheque was received, that is on September 19th, 2018.

As per the the above scenario, various dates are as under:

  • Actual date of issue of invoice: September 18th, 2018
  • Due date for issue of invoice: September 9th, 2018 (as supply involves movement of goods)
  • Date of receipt of payment: September 19th , 2018 (earlier of entry in books of accounts and credit made in the bank account)

Therefore, as per rule, the time of supply would be the earliest of the above dates, that is, September 9th, 2018.

Illustration

Armaan delivers consignments of bricks to various contractors on a continuous supply basis. Following table displays the details with regards to one of the supplies made by him.

Actual Issue of Invoice (Date)Statement of Account (Due Date) Receipt of Payment Date Time of Supply
November 1stNovember 5thNovember 1stNovember 1st
December 11thDecember 5thDecember 11thDecember 5th
January 1stJanuary 5thJanuary 1stJanuary 1st

Illustration

Say Vipul Ltd. receives payment of Rs 1,00,000 in advance. And the invoice issued is for Rs 99,000.

In this case, the Rs 1000 is in excess of the invoice amount that stands at Rs 99,000. The invoice for the excess amount of Rs 1,000 would be issued subsequently. Hence, the time of supply in this case can be taken to be the date of the issue of the next invoice for the excess amount. This is despite the fact that the payment was received earlier.

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
  • The date of recording the payment in the books of account by the recipient

Illustration

Gauri is an unregistered trader. She supplies goods to a registered recipient on Feb 1st, 2018. Goods supplied were received by Gaurav at his factory on February 28th, 2018. The invoice for the supply made was issued on February 15th, 2018. However, the payment was made on March 5th, 2018.

This is the case of reverse charge mechanism since the supplier that is Gauri is unregistered. Hence, the time of supply would be the earliest of:

  • Date of receipt of goods: In this case, February 28th, 2018 is the date of receipt of goods.
  • 30 days from date of invoice: March 16th, 2018 is 30 days from the date of invoice
  • Date of payment: March 5th, 2018 is the actual date of payment. Hence the time of supply would be February 28th, 2018.

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.
  • The 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.

Illustration

Vipul Ltd., enters into an arrangement with “Carlton London” and buys vouchers in return. These vouchers get issued on December 14th, 2018. The company then distributes these vouchers, each carrying a denomination of Rs 4,000, to all its employees on December 24th, 2018.

The validity of the vouchers ends on January 31st, 2019.Thus, using such vouchers, the employees can buy shoes of their choice. Now, employees make the most of this opportunity and get their vouchers redeemed on the first day of the new year, that is, on January 1st, 2019.

In this case, the supply is identifiable at the point of issue of the voucher. Therefore, the time of supply would be taken as date of issue of vouchers, that is, December 14th, 2018.

Illustration

Nandini buys a voucher from Lifestyle for Rs 10,000. She gifts the voucher to Karan on February 14th. The validity of the voucher was until February 28th . Karan gets the Voucher redeemed at the nearby Lifestyle store on February 28th.

In this scenario, the supply was not identifiable at the point of issue of the voucher. This is because Karan was open to purchase anything from Lifestyle. Hence, the time of supply would be taken as the date of redemption of the voucher, that is February 28th.

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 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 Before 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 After 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.
  • Then, 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.
[/vc_column][/vc_row]

All Topics

 

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.

Related Articles

CGST: Full Form, Meaning and Applicability of CGST

In this article you will learn: What is CGST? CGST Full Form…

Read more

IGST: Full Form, Meaning and Applicability

In this article, you will learn: Let’s Understand GSTR 7 Filing Process…

Read more

SGST: Full Form, Meaning & SGST Act

In this article you will learn: What is SGST? SGST Full Form…

Read more