Sec 14 – Change in rate of tax in respect of supply of goods or services

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Sec 14 – Change in rate of tax in respect of supply of goods or services 2017-04-14T11:45:42+00:00

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  • Ashish BadalaCA Ashish Badala
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    #1434 |

    Notwithstanding anything contained in section 12 or section 13, the time of supply, where there is a change in the rate of tax in respect of goods or services or both, shall be determined in the following manner, namely:–
    (a) in case the goods or services or both have been supplied before the change in rate of tax,–
    (i) where the invoice for the same has been issued and the payment is also received after the change in rate of tax, the time of supply shall be the date of receipt of payment or the date of issue of invoice, whichever is earlier; or
    (ii) where the invoice has been issued prior to the change in rate of tax but payment is received after the change in rate of tax, the time of supply shall be the date of issue of invoice; or
    (iii) where the payment has been received before the change in rate of tax, but the invoice for the same is issued after the change in rate of tax, the time of supply shall be the date of receipt of payment;
    (b) in case the goods or services or both have been supplied after the change in rate of tax,–

    (i) where the payment is received after the change in rate of tax but the invoice has been issued prior to the change in rate of tax, the time of supply shall be the date of receipt of payment; or
    (ii) where the invoice has been issued and payment is received before the change in rate of tax, the time of supply shall be the date of receipt of payment or date of issue of invoice, whichever is earlier; or
    (iii) where the invoice has been issued after the change in rate of tax but the payment is received before the change in rate of tax, 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 if such credit in the bank account is after four working days from the date of change in the rate of tax.
    Explanation.–For the purposes of this section, “the date of receipt of payment” shall be the date on which the payment is entered in the books of account of the supplier or the date on which the payment is credited to his bank account, whichever is earlier.

    Priya MadrechaPriya Madrecha
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    14.1 Analysis
    Payment of tax requires the presence of all the following events:
    (i)    supply of goods or services
    (ii)    issue of invoice
    (iii)    payment for the supply
    When there is a change in the rate of tax during the occurrence of these three events, there may be some concern about the applicability of the correct rate of tax. Section 14 addresses this aspect clearly.
    Where the supply takes place after the change in the rate of tax, the time of supply may be as follows:

    Sl.
    No.     Case
    Date of supply of goods/ services     Invoice date     Payment by recipient     Time of supply     Applicable tax rate
    1     Case I     10-Jul-18     20-Jul-18     10-Aug-18     20-Jul-18     18%
    2     Case II     10-Jul-18     05-Sep-18     25-Jul-18     25-Jul-18     18%
    3     Case III     10-Jul-18     05-Aug-18     10-Aug-18     05-Aug-18     12%

    4     Case IV     10-Aug-18     25-Jul-18     05-Aug-18     05-Aug-18     12%
    5     Case V     10-Aug-18     05-Sep-18     25-Jul-18     05-Sep-18     12%
    3     Case VI     10-Aug-18     20-Jul-18     25-Aug-18     20-Jul-18     18%
    Although supply has not yet taken place, the time of supply determined as above is valid and not in violation of the levy of GST for the following reasons:
    (i)    Supply is defined in section 7(1)(a) as ‘……made or agreed to be made…..’
    (ii)    Levy of GST in section 9 is on such supply, that is, ‘made or agreed to be made’ Prescribing the time of supply anterior to the time of actual supply is well accommodated in the language of the Act. Statutory Provision

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