Goods and Services Tax (GST) is payable on supply of goods and/or services in India. However, to charge GST, one of the most important thing to find out is the point of time when GST becomes payable. Therefore, events like issuing of invoice, receipt of payment, provision of service, receipt of services in books of account need to be analysed to know the time of supply.
In this article, we will be discussing the provisions of time of supply of goods under GST law in detail. If you are looking for provisions related to services then, you can refer our article on time of supply of services under GST law.
How the term Goods defined under GST law
Before getting into time of supply of goods, you first need to understand the definition of goods.
As per section 2(52) of CGST Act, 2017, Goods means every kind movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be served before supply or under the contract of supply.
Based on the definition of goods as discussed above it exclude following things;
- Immovable properties
This means, above three items will not be considered as goods under the GST law. Now let us discuss section 12 of CGST Act, 2017 to understand time of supply of goods.
What is time of supply of goods under GST law
As per section 12, the liability to pay tax on goods shall arise at the time of supply which shall be the earlier of the following dates, namely;
- The date of issue of invoice by the supplier or the last date on which the person is required U/s 31 to issue the invoice with respect to the supply; or
- The date on which the supplier receives the payment with respect to supply. Such date shall be the date on which the payment is entered in the supplier’s books of account or the date on which the payment is credited to his bank account, whichever is earlier.
Supply for this purpose shall be deemed to have been made to the extent it is covered by the invoice or, as the case may be, the payment.
What to do if time of supply not possible to determine
If it’s not possible to determine the time of supply as per the provisions of section 12(2), 12(3) and 12(4) of CGST Act, 2017, then the time of supply in a case where a periodical return has to be filed, be the date on which such return is to be filed or in any other case, be the date on which the tax is paid.
In case of an addition in the value of supply by way of interest, late fee, or penalty for delayed payment of any consideration, the time of supply to that extent shall be the date on which the supplier receives such addition in value. Such addition of interest, late fee or penalty depends on the payment terms of the contract between supplier and recipient.
Suppose as per the terms of agreement, Mr A has paid interest at the rate of 4% for delay in payment of dues against supply of certain goods, in this case, time of supply for the goods is the date of issue of invoice and the time of supply of interest amount added due to delay in payment is the date when such addition in value is received.
Exemption for payment of tax on advances received for supply of goods
Liability to pay tax depends on the time of supply.
As per notification number 66/2017 CT dated 15.11.2017, a registered person (excluding composition supplier) should pay goods and services tax on the outward supply of goods at the time of supply specified U/s 12(2) (a) i.e. date of issue of invoice or the last date on which invoice ought to have been issued in terms of section 31.
This means, a registered person (excluding composition supplier) are exempted from paying goods and services tax at the time of receipt of advance in relation to supply of goods. Therefore, as per section 12 (as discussed above) and on the basis of notification 66/2017, all taxpayers except composition supplier are liable to pay GST only when the invoice for the supply of goods issued or ought to have been issued.
As per GST law, a composition supplier is required to pay GST quarterly on his turnover. As advance received does not form part of taxable supplies and in turn, also does not form part of turnover, composition supplier are also not required to pay GST on such advance received.
As time of supply is based on tax invoice, we suggest you to read our article on tax invoice in GST regime.
If GST is charged on reverse charge mechanism, then determination of time of supply will be different.
Time of supply of goods when tax is paid or payable on reverse charge basis
In case of supplies in respect of which tax is paid or liable to be paid in reverse charge basis, the time of supply shall be the earliest of the following date, namely:
- The date of the receipt of the goods, or
- The 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, or
- The date immediately following 30 days from the date of issue of invoice or any other document, by whatever name called, in lieu thereof by the supplier, or
If it’s not possible to determine the time of supply, the date of entry in the books of account of the recipient of supply shall be taken as the time of supply.
In case of supply of vouchers by a supplier, the time of supply shall be;
- The date of issue of voucher, if the supply is identifiable at that point; or
- The date of redemption of voucher, in all other cases
Vouchers are instruments issued to exchange against payment for goods and/or services. It’s an instrument that certain persons are bound to accept as consideration, part or full for goods and/or services.
For example, suppose certain vouchers which can be exchanged for foods are issued to you by your employer. You can purchase any food item from the voucher. In such case, the date of redemption of voucher will be taken as time of supply as supply is not identifiable at the time of issue of the voucher to you by your employer. Let us assume that your employer has issued voucher to you to buy a particular item from a departmental store. Now, on the basis of the voucher issued to you, you can buy that particular item from the departmental store. In such case, supply is identifiable at the time of issue of voucher. Therefore, date of issue of voucher will be considered as time of supply of goods.