Time of supply of goods under GST

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  • Avalara IndiaAvalara India
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    The current indirect taxation system (consisting of multiple taxes) is about to undergo a drastic change, with India’s new Goods and Services Tax (GST, a single taxation system for the entire country) being rolled out 1 July 2017.

    Many provisions are changing, including the concept of point of taxation – the point in time when goods and/or services are deemed to have been provided and when the tax liability can be determined.

    Under the current tax regime, the point of taxation differs for each tax type:

    • Manufacturing of goods: The liability to pay tax arises at the time goods are removed from the factory/excise unit
    • Services: Date payment is received or date invoice is issued, whichever is earlier
    • Sale of goods: The liability to pay tax arises on the sale of goods with both interstate VAT and intrastate GST

    Under GST, the time of supply varies based on the type of transaction. The various provisions related to each are outlined below.

    S. No.Transaction typeTreatment under GST
    1.GoodsTime of supply shall be the earlier of*:· The date of issue of an invoice by the supplier or the last date on which he is required to issue an invoice

    · The date of receipt of payment by the supplier with regard to the supply

    2.ServicesTime of supply shall be the earlier of:· The date of issue of an invoice by the supplier or the last date on which he is required to issue an invoice

    · The date of receipt of payment

    3.Supply with vouchersTime of supply shall be the earlier of:· The date of issue of a voucher, if the supply can be identified at that point

    · The date of redemption of a voucher, in all other cases

    4.Reverse chargeUnder reverse charge, the liability to pay tax is on the recipient of goods/services and not the supplier. The time of supply in that case shall be the earlier of:· The date of receipt of goods

    · The date on which the payment is made

    · The date immediately following 30 days from the date the supplier issues the invoice

    5.Residue methodIf the time of supply of goods cannot be determined using any of the above methods, then the residue method applies. This means that the time of supply of goods would be:· The date on which the periodic GST return has to be filed

    · Or, the date of payment of CGST/SGST, if the return needs not be filed

    * Provided that when the supplier of taxable goods receives an amount up to 1,000 rupees in excess of the amount indicated on the tax invoice, the time of supply to the extent of such excess, shall at the option of the said supplier, be the date of issue of invoice.

    For the above, the date of receipt of payment shall be the earlier of:

    • The date on which the payment is entered in the books of account
    • The date on which the payment is credited to the bank account

    Let’s apply the above provisions to a few examples to better understand how time of supply can vary:

    Example 1

    Since the date of entry into the books is earlier than the date of credit to the bank account, the time of supply is 30 September.

    Date of invoiceReceipt of payment entered in books of accountReceipt of payment credited to bank accountTime of supply of goods
    11 October, 201730 September, 20173 October, 201730 September,2017

    Example 2

    Date of invoiceReceipt of paymentTime of supply of goods
    5 October, 201730 August, 201730 August, 2017

    Example 3: Reverse charge

    Date of invoiceReceipt of goodsDate of paymentTime of supply of goods
    28 August, 20175 September, 201726 August, 201726 August, 2017
    24 August, 20171 July, 201728 August, 201731 July, 2017

    These provisions for determining the time of supply will be entirely new for taxpayers, especially for VAT and excise payers. Small businesses, too, will face many hurdles in adapting to the new law – GST guidelines are far more onerous than what they face today.

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