1. Overview
It is necessary to know the date on which the tax liability arises, i.e. the date on which the charging event occurred, in order to calculate and discharge tax liability. It is referred to as Time of Supply (TOS) in the GST Act. The GST Act includes provisions for determining the time of supply of goods and the time of supply of services.
Once the time of supply (TOS) is determined, the rate of GST and the amount of GST payable at that time are calculated, and such liability is to be discharged by making GST payment within the time specified.
2. TOS of Goods
The obligation to pay tax on goods arises at the time of supply in the following circumstances:
i. Supply of goods, where supplier is liable to pay tax under normal situation i.e. forward charge (Normal Charging Mechanism a.k.a NCM)
a) Date of issue of invoice by the supplier. If the invoice is not issued, then the last date on which the supplier was legally bound to issue the invoice# w.r.t the supply, or
b) Date on which the supplier receives the payment## (Not Relevant for advances received for supply of goods).
whichever is earlier
# Last date for issuance of invoice shall be determined in the following manner-
Where supply involves movement of goods: Before or at the time of removal of goods for supply to the recipient.
Where supply does not involve movement of goods: Before or at the time of delivery of goods or making the goods available to the recipient.
##Date of receipt of payment refers to:
Date on which the payment is recorded in books of account of the entity, or
Date on which the payment is credited to the entity’s bank account.
whichever is earlier
ii. Time of Supply of goods where tax is levied on reverse charge basis (Reverse Charging Mechanism a.k.a RCM)
a) Date of receipt of goods
b) Date on which the payment is entered in the books of accounts of the recipient or the date on which the payment is debited in his bank account, whichever is earlier
c) Date immediately following 30 days from the date of issue of invoice or any other legal document in lieu of invoice by the supplier
whichever is earlier
If the time of supply cannot be determined in the aforementioned manner, the time of supply is the date of entry of the transaction in the books of accounts of the recipient of supply.
iii. Time of Supply in case of Vouchers:
a) If the supply is identifiable at the point at which voucher is issued: Date of issuance of the voucher
b) In all other cases i.e. the supply is not identifiable at the point at which voucher is issued: Date of redemption of voucher
iv. Residuary Provision
In case it is not possible to determine the time of supply under aforesaid provisions, the time of supply is:
a) Due date of filing of return, in case where periodical return has to be filed
b) Date of payment of tax (in all other cases)
v. Time of supply in relation to an addition in the value of supply by way of interest, late fees or penalty:
The date on which the supplier receives the addition in value due to interest, late fees, or penalties for late payment of any consideration shall be the time of supply.
3. TOS of Services
The obligation to pay tax on services arises at the time of supply in the following circumstances:
i. Time of Supply of services, where supplier is liable to pay tax under normal situation i.e forward charge (Normal Charging Mechanism a.k.a NCM)
a) If the invoice is issued within the legally prescribed period under section 31(2) of the CGST Act:- Date of issue of invoice by the supplier or the date of receipt of payment, whichever is earlier
b) If the invoice is not issued within the legally prescribed period under section 31(2) of the CGST Act:- Date of completion of provision of service or the date of receipt of payment, whichever is earlier
c) In case the aforesaid two provisions do not apply: Date on which the recipient shows the receipt of service in his books of account
whichever is earlier
Note: Time Limit for issuance of invoice for supply of services:
a) In case of supply of services in a normal situation: The invoice shall be issued within a period of thirty days from the date of the supply of service. (45 days in case of insurance companies/banking companies/financial institutions including NBFCs)
b) In case of an insurer/banking company / financial institution, including a non-banking financial company/ Telecom operator, or any other class of supplier of services as may be notified by the Government making taxable supplies of services between distinct persons as specified in Section 25: The Invoice may be issued before or at the time recording the same in books of account or before the expiry of the quarter during which the supply was made.
ii. Time of Supply of Services which are taxable on reverse charge basis (Reverse Charging Mechanism a.k.a RCM)
a) Date of payment as entered in the books of account of the recipient or the date on which the payment is debited in his bank account, whichever is earlier
b) Date immediately following 60 days from the date of issue of invoice or any other legal document in lieu of invoice by the supplier
whichever is earlier
If the time of supply cannot be determined in the aforementioned manner, the time of supply is the date of entry of the transaction in the books of accounts of the recipient of supply.
iii. Time of Supply of services in case of vouchers
a) If the supply is identifiable at the point at which voucher is issued: Date of issuance of the voucher
b) In all other cases i.e. the supply is not identifiable at the point at which voucher is issued: Date of redemption of voucher
iv. Residuary Provisions
If the time of supply cannot be determined under the aforementioned provisions, the time of supply is:
a) Due date of filing of return, in case where periodical return has to be filed
b) Date of payment of tax (in all other cases)
4.TOS where there is change in rate of tax in respect of supply of goods or services or both
In case the goods or services or both have been supplied before the change in rate of tax:
Invoice Issued | Payment Received | TOS |
Before change in rate | After change in rate | Date of invoice |
After change in rate | After change in rate | Date of invoice or Date of payment, whichever is earlier |
After change in rate | After change in rate | Date of payment |
In case the goods or services or both have been supplied after the change in rate of tax:
Invoice Issued | Payment Received | TOS |
Before change in rate | After change in rate | Date of payment |
Before change in rate | Before change in rate | Date of invoice or Date of payment, whichever is earlier |
After change in rate | Before change in rate | Date of invoice |
What is meant by date of receipt of payment in case of change in rate of tax:
Normally, the date of receipt of payment is the date of credit in the recipient's bank account or the date the payment is entered into his books of account, whichever is earlier.
In the case of a change in tax rate, the date of receipt of payment is the date of credit in the bank account if the credit occurs after four working days from the date of the change in tax rate.
We hope the above blog was helpful in enhancing your knowledge on the matter. In case of any queries feel free to get in touch with our team of experts.
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Regards
Hemant Bardia
+91-96323-32850
umang@caumang.com
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