2019-12-02 13:12:24GST CenterEnglishThe liability to pay GST arises at the time of supply of goods or services. This article talks about provisions relating to the time of...https://quickbooks.intuit.com/in/resources/in_qrc/uploads/2019/12/What-is-Time-of-Supply-of-Services-Under-GST.jpghttps://quickbooks.intuit.com/in/resources/gst-center/time-of-supply-of-services/What is Time of Supply of Services Under GST?

What is Time of Supply of Services Under GST?

9 min read

GST is a destination based tax that taxes supply of goods or services at the point of consumption. This means that the liability to pay GST arises at the point of supply, that is at the time of supply and place of supply.

This is unlike the previous indirect tax regime, where the liability to pay different tax arose at different points.

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.

It is important to know the time when the tax liability arises because a taxpayer would be able to calculate the rate of tax, value, and due dates for payment of taxes.

Thus, GST lays down provisions for the time of supply of goods as well as services. Section 12 of the CGST Act relates to the guidelines for the time of supply of goods. Whereas, Section 13 of the CGST Act relates to the guidelines for the time of supply ofservices.

What is Time of Supply?

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 services. Thus, the following section covers the time of supply for services under:

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
  • The 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
  • The 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
  • The 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
  • The date of entry in the books of account

Furthermore, while determining the time of supply of services, one needs to remember that:

  • The invoice must be issued either before the provision of service or
  • Within 30 days from the date of supply of service. This would be 45 days for BFSI companies and NBFCs).

Additionally, there are cases where the supply involves continuous supply of services. Now, in such scenarios the invoice must be issued:

  • On or before the due date of payment. Provided the contract specifies the date or
  • On or before the date of actual receipt of payment. Provided the due date is not ascertainable from the Contract or
  • On or before the date of completion of milestone event. Provided the payment is linked to completion of a milestone event.

Additionally, in case there is any excess payment received upto Rs 1,000, then time of supply of services in such a case would be date of the invoice issued with respect to such excess amount.

Illustration

Mehak selects a banquet hall to organize a team event. Following are the particulars regarding the same.

15th OctoberThe Banquet Hall was selected and an advance money of Rs 25,000 was deposited. However, the total booking amount agreed upon was Rs 1,00,000.
30th NovemberThe corporate event event took place in the Banquet Hall.
14th DecemberAn invoice for the balance amount was issued for Rs 75,000. This amount is after adjusting the advance money.
31st DecemberThe balance payment was received.

As it is quite evident from the table above, the invoice was issued on time. That is, it is within 30 days from the date of issue of invoice. Therefore, the time of supply in this case shall be the earlier of:

  • Date of invoice: 14th December
  • The date of receipt of payment: 31st December

Now, since Rs 75,000 was received on December 14, the time of supply for such an amount would be December 14. However, the time of supply for the advance money of Rs 25,000 is October 15 since the invoice was issued later on.

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

Illustration

Kapoor & Co.is an unregistered supplier that offers Accounting services to Sharma Ltd and issues an invoice on September 7, 2018. Since the quality of the services offered was not upto the marked, the payment got delayed and hence it was made on December 16, 2018. The payment was made through cheque and the same was recorded in the books of accounts of the recipient.

Now, the time of supply in the above case shall be the earlier of:

  • 60 days from the date of issue of invoice (September 7, 2018)
  • Date of payment (December 14, 2018)

That is September 7, 2018 would be the time of supply.

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

Illustration

Kapoor & Co.is an unregistered supplier that offers Accounting services to Sharma Ltd and issues an invoice on September 7, 2018. Since the quality of the services offered was not upto the marked, the payment got delayed and hence it was made on December 16, 2018. The payment was made through cheque and the same was recorded in the books of accounts of the recipient.

Now, the time of supply in the above case shall be the earlier of:

  • 60 days from the date of issue of invoice (September 7, 2018)
  • Date of payment (December 14, 2018)

That is September 7, 2018 would be the time of supply.

Vouchers

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

  1. 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.
  2. The 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 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.
  • 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.
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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