Time of Supply

  • Time of Supply is important for the taxable person for GST purposes.
  • Point of taxation means the point in time when the goods/services deemed to be supplied/provided.
  • The point of taxation thus enables to determine the tax rate, its value, and the due dates for the payment of taxes.

Major changes

In the present scenario, there is no provision relating to payment of tax on advance received. But under GST, if a person has received the advance for the supply of goods it is taxable.

Importance of Time of Supply

  • Actual Tax Point means when a taxable person should account for GST.
  • Basic tax point is when:
    • Goods are removed or when goods are made available to a customer; or
    • Services are performed.

Rules of Time of Supply

time of supply

For a detailed explanation refer to image below:

Rule 1 and Rule 2

time of supply

Rule 3

time of supply

Types of time of supply

  • Time of supply of goods
  • Time of supply of services

The Time of supply of GOODS

The liability to pay tax on goods arises whichever is the earliest of the following dates:

time of supply

The process of time of supply of goods

time of supply

In case of Supply of Vouchers

time of supply

When none of the previous principles decides the time of supply?

Where it is not possible to determine the time of supply based on 3 rules, then the time of supply shall be:

  • In a case of filing a periodical return
    • the date on which you file such return.
  • In any other case,
    • the date on which you pay tax.

What about the receipt of interest, late fee or penalty?

According to, section 15(2) of clause (d) of the GST act specifies that interest, late fee or penalty for delayed payments for any consideration for any supply will be included in the transaction value.

Time of supply of Services

The liability to pay tax on services shall arise at the time of supply

It shall be the earliest of the following dates:

Under Clause (a)

The date of issue of the invoice by the supplier or 30 days from the date of supply of service or the date of receipt of payment, whichever is the earliest.

Clause (b)
  • Date of provision of service
    • If you do not issue an invoice within the abovesaid period, or
    • date of receipt of payment
Clause (c)

The date on which the recipient shows the receipt of services in his books of account, in a case where the provisions of clause (a) or clause (b) do not apply.

Tax on Reverse Charges

You have to pay tax on reverse charges on:

  • The date on which the recipient enters the payment in his books of accounts
  • Or, the date on which he gives payment from his bank account, whichever is earlier.
  • The date immediately following 60 days from the date of issue of invoice or any other document, by whatever name called, in lieu thereof by the supplier.
  • Where it is not possible to determine the time of supply under clause (a) or (b), the time of supply shall be the date of entry in the books of account of the recipient of the supply.
  • In case of supply by associated enterprises,
    • where the supplier of service is outside India
      • time of supply is the date on which the recipient enters to his books of accounts or the date of payment, whichever is earlier.

What about the receipt of interest, late fee or penalty?

  • Section 13(6) of the GST Act specifies that interest, late fee or penalty for delayed payments for any consideration for any supply will be included in the transaction value.
  • For example, a supplier receives consideration in September instead of due date of July and for such delay, an interest amount of INR 1000 can be received.

Time of supply of services by Associated Enterprises located outside India?

In this case, the time of supply is the date of entry in the books of account of the recipient or the date of payment, whichever is earlier.

What is the time of supply when a change in tax rate?

  • In case of a change in tax rate before the supply of supplies.

TIME OF SUPPLY

  • In case of a change in tax rate after the supply of supplies.

TIME OF SUPPLY

Exception

The date of receipt of payment will be the date of credit in the bank account if such credit in the bank account is after 4 working days from the date of change in the rate of tax.

Explanation

  • “The date of receipt of payment” is the date on which the supplier enters the payment in his books of accounts, or
  • The date on which he receives the credit in his bank account, whichever is earlier.

Conclusion

Time of Supply is a crucial concept to determine the Actual Tax Point which is important for a taxable person.

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