Section 14 determines time of supply on change in rate of tax.

Section 14

Notwithstanding anything contained in section 12 or 13,

where there is a change in the rate of tax in respect of goods or services or both,

time of supply, shall be determined in the following manner

Before means = before the change in rate of tax

After means = after the change in rate of tax

Section 14

It is to be noted that timing of 2 out of the 3 markers (supply, invoice, payment) determines the time of supply.

If any 2 of them occur before the change in rate of tax, the time of supply will fall in the period prior to change in rate of tax i.e., old rate will be applicable.

However, if any 2 of them occur after the change in rate of tax, the time of supply will fall in the period after the change in rate of tax i.e., new rate will be applicable.

Ex

Mr. A, an interior decorator, designs and renovates the office of XYZ in June. The invoice is to be raised after approval of the work.

In the meantime, the rate of tax is changed on 5^th July. Invoice is raised and payment made later in July. Here, the time of supply is after the change in rate of tax, though the service was completed prior to the change

Ex

A Ltd. makes custom-made precision tools for which it takes full advance with the purchase order. One such order is received on 13th April and full amount is paid with the order.

The tools are manufactured and delivered on 22nd May. Invoice is also issued on the same day.

In the meanwhile, rate of tax was increased on the tools of this description from 20th May onwards.

Here, increased rate of tax will be applicable as goods are supplied and invoice issued after 20th May.

Explanation to section 14

For the purposes of this section, “the date of receipt of payment” shall be earlier of

date on which the payment is entered in the books of the supplier or

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

Proviso to Section 14

Date of receipt of payment shall 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.

Ex

Rate of tax is changed on 10th July.

Receipt of payment is recorded in the books of account of the supplier on 8th July.

The payment is credited in the supplier’s bank account on 15 th July. The Bank was open all days between 10 th and 15 th July. Here, the date of receipt of payment is 15 th July.

Question & Answer