Question arises at what point of time, gst becomes payable. Provisions relating to ‘time of supply’ provide answers to such question.

Section 12 provides for the determination of time of supply of goods in the following situations:

Supply of goods under forward charge

Supply of goods under reverse charge;

Supply of vouchers that can be used to pay for goods;

Residual cases

Addition to value of supply of goods by way of interest or late fee or penalty for delayed payment

Provisions of time of supply under CGST Act have also been made applicable to IGST Act vide section 20 of the IGST Act.

Section 12(1)

The liability to pay tax on goods shall arise

at the time of supply, as determined in accordance with the provisions of this section.

As per section 12(1), GST becomes payable on goods at the time of supply of goods.

Time of supply indicates the point in time when the liability to pay tax arises.

Provisions of time of supply under CGST Act have also been made applicable to IGST Act vide section 20 of the IGST Act.

Section 12(2)

The time of supply of goods shall be the earlier of

(a) date of issue of invoice or

last date on which invoice is required to be issued u/s 31; or

(b) date on which the supplier receives the payment with respect to the supply:

For knowing date on which invoice is required to be issued, please refer guide on section 31

Explanation 2 to Section 12(2)

“the date on which the supplier receives the payment”

shall be earlier of

date on which the payment is entered in his books of account or

date on which the payment is credited to his bank account.

As per Section 12(2)(b) above, if any person receives advance payment before issue of invoice, then time of supply shall be date of receipts of payment and he shall be liable to pay tax on the advance received even if he has not issued invoice in respect of that advance.

However in following cases, tax is not payable on advance receipts

Notification No. 66/2017-Central Tax dt. 15-11-2017

Central Government notifies that

RP who did not opt for the composition levy u/s 10

shall pay the central tax on the outward supply of goods at the time of supply as specified in section 12(2)(a) including in the situations attracting the provisions of section 14, and

shall accordingly furnish the details and returns as mentioned in Chapter IX of the said Act and the rules made thereunder and the period prescribed for the payment of tax by such class of RPs shall be such as specified in the said Act.

In case of supply of goods (except composition suppliers) levy of tax at the time of receipt of advance is exempted.

In case of supply of goods (except for composition supplier), tax is payable only on the issuance of invoice/last date of issuance of invoice even if any advance or part payment has been received before the issuance of invoice/last date of issuance of invoice.

Section 12(2) read with Notification No. 66/2017-Central Tax dt. 15-11-2017

time of supply of goods shall be the earlier of

The date of issue of invoice by the supplier or

the last date on which he is required u/s 31 to issue the invoice for such supply

The relief of not paying GST on receipt of advance is available only in case of supply of goods and not for supply of services.

Question & Answer

Proviso to Section 12(2)

If supplier receives an amount up to Rs.1,000 in excess of the amount indicated in the tax invoice,

time of supply to the extent of such excess amount shall, at the option of the said supplier, be the date of issue of invoice in respect of such excess amount.

Relevance of 1^st Proviso to section 12(2)

After issue of Notification No. 66/2017-Central Tax dt. 15-11-2017, i.e. wef 15.11.2017, GST on supply of goods is payable only on the basis of issuance of invoice, this provision is practically irrelevant for supply of goods.

Question & Answer

Explanation 1 to Section 12(2)

For clauses (a) and (b), “supply” shall be deemed to have been made to the extent it is covered by the invoice or the payment.

Suppose, a part of the consideration is paid in advance or invoice is issued for part payment, the time of supply will not cover the full supply. The supply is deemed to have been made to the extent it is covered by the invoice or the part advance payment.

Ex

A Ltd. enters into an agreement with B Ltd. to supply 100 kg of raw material. However, A Ltd. supplies only 80 kg of raw material and issues the invoice for the same. Here, the supply would be deemed to have been made in respect of 80 kg of raw material, i.e. to the extent covered by the invoice. Therefore, the provisions relating to time of supply will also be applicable to supply of 80 kg of raw material and not for entire 100 kg of raw material.

Section 12(3)

In case of supplies on which tax is payable on RCM basis,

time of supply shall be the earliest of following dates

(a) date of the receipt of goods; or

(b) date of payment as entered in the books of account of the recipient or

debit date of payment in his bank account; or

(c) date immediately following 30 days from the date of invoice or any other document:

1^st Proviso - If Time of Supply depends on factors other than above mentioned factors

where it is not possible to determine the time of supply under clause (a) or (b) or (c),

time of supply shall be the date of entry in the books of the recipient of supply.

Above provisions are same for goods and service except date of receipts of goods and 30 days are replaced with 60 days.

The relief of not paying GST at the time of receipt of advance is available only in case of supply of goods, the tax on which is payable under forward charge. In case of reverse charge, GST is payable at the time of payment, if payment is recorded/made before receipt of goods (advance payment).

Question & Answer

Vouchers are instruments that can be exchanged as payment for goods or services of the designated value. As per the definition, they are instruments, that certain persons (potential suppliers) are obliged to accept as consideration, part or full, for goods and/or services.  The instrument or its related documentation sets out the terms and conditions of use, the  and/or services covered, and the identity of the potential suppliers of such goods and/or services.

Section 12(4)

In case of supply of vouchers by a supplier, the time of supply shall be

(a) the date of issue of voucher, if the supply is identifiable at that point; or

(b) the date of redemption of voucher, in all other cases.

Ex

A Ltd. sells food coupons to B Ltd. The company gives these coupons to its employees as part of the agreed perquisites. The coupons can be redeemed for purchase of any item of food /provisions in the outlets that are part of the program.

As the supply against which the coupon will be redeemed is not known on the date of the sale of the coupon, the time of supply of the coupon will be the date on which the employee redeems it against food / provision items of his choice.

Ex

With each purchase of a large pizza during the Christmas week from Perfect Pizza, one can buy a voucher for Rs.20 which will be redeemable till 5th Jan for a small pizza. As the supply against which the voucher will be redeemed is known on the date of issue of the vouchers, the time of supply is the date of issue of the voucher.

Question & Answer

Section 12(5)

Where it is not possible to determine the time of supply u/ss (2) or (3) or (4),

the time of supply shall–

(a) in a case where a periodical return has to be filed, be the date on which such return is to be filed; or

(b) in any other case, be the date on which the tax is paid.

Section 12(6)

The time of supply to the extent it relates to an addition in the value of supply by way of interest, late fee or penalty for delayed payment of any consideration

shall be the date on which the supplier receives such addition in value.

Ex

A Ltd. sold goods to B Ltd. on 6th June with a condition that interest @ 2% per month will be charged if B Ltd. failed to make payment within 15 days of the delivery of the goods. Goods were delivered as also the invoice was issued on 6th June. B Ltd. paid the consideration for the goods on 6 th July along with applicable interest.

Time of supply for the goods sold is the date of issue of invoice, i.e. 6 th June and the

time of supply for addition in value by way of interest is the date when such addition in value is received by A Ltd., i.e. 6th July.

Commercially, most of the contract of supplies stipulate payment of interest/late fee/penalty etc. in case of payment of consideration beyond the agreed time period.

Such interest/late fee/penalty etc. is includible in value of taxable supply.

Question & Answer