The taxable event under GST is supply. The time of supply fixes the point when the liability to charge GST arises. It also indicates when a supply is deemed to have been made. Even if the supply has taken place, GST would not become payable unless the time of supply is properly determined. Hence, determination of specific time of supply is crucial. The CGST/SGST Act provides separate provisions for—
— Time of Supply of Services.
(1) When shall the Liability to Pay Tax on Services Arise [Section 13(1) of CGST Act, 2017]
The liability to pay tax on Services shall arise at the time of supply, as determined in accordance with the provisions of this section.
(2) Time of Supply of Services, where Supplier is liable to Pay Tax under normal situation i.e. under Forward Charge [Section 13(2) of CGST Act, 2017]
In normal situation, the time of supply of service will be determined as under:
| Situation |
Time of supply of service |
where invoice is issued within prescribed period under section 31(2)
For prescribed period of issue of invoice under Section 31(2) See below. |
(1) Date of issue of Invoice; or
(2) Date of receipt of payment
whichever is earlier |
Where invoice is not issued within prescribed period under section 31(2) |
(1) Date of completion of provision of service;
or
(2) Date of receipt of payment
whichever is earlier |
Thus, in case of supply of service, events like date of issue of invoice, date of receipt of payment, time period for issue of invoice prescribed under Section 31(2) and date of completion of provision of services arc the factors to determine the time of supply of services.
Time limit for issuance of invoice for supply of services [Section 31(2) read with rule 47 of CGST Rules. 2017]
| Situation |
Time limit for issuance of Tax Invoice under section 31(2) |
1. In case of supply of services in a normal situation |
the invoice needs to be issued either—
— before the provision of service or
— within 30 days (45 days in case of insurance
companies/banking companies/financial
institutions including NBFCs) from the date of supply of service. |
2. In ease of cessation of supply of services before completion of supply |
the invoice (to the extent of the supply made before such cessation) should be issued at the time when the supply ceases. |
3. In case of continuous supply of Services |
the invoice should be issued either—
(i) on/before the due date of payment or
(ii) before/at the time when the supplier of service receives the payment
(iii) on/before the date of completion of the milestone event when the payment is linked to completion of an event. |
4. In case of insurance companies/banking companies/ financial institutions including NBFCs/telecom companies/notified supplier of services making taxable supplies between distinct persons as specified in section-25. |
the invoice may be issued before or at the time of recording such supply in the books of account, or before the expiry of the quarter during which the supply was made. |
“The date of receipt of payment” [Clause (ii) of Explanation):
‘Thc 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.
(2a) Part payment or invoice issued for part payment [Clause (i) to Explanation] :
The “supply” shall be deemed to have been made to the extent it is covered by the invoice or, as the case may be, the payment.
Thus, where 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 shall be deemed to have been made to the extent it is covered by the invoice or the part advance payment.
Example :
Mr. Dust, a chartered accountant, provides the following details:
| (a) |
Date of supply of services |
25.10.2019 |
(b) |
Date of issue of invoice (within 30 days of provision of service) |
28.10.2019 |
(c) |
Date of entering the payment in the books of account |
7.11.2019 |
(d) |
Date of credit of payment in bank |
6.11.2019 |
Determine the time of supply of services.
Solutions :
| (i) |
(i) Date of issue of invoice (within 30 days of provision of service) |
6.11.2019 |
(ii) |
(ii) Date of entering the payment in the books of account |
7.11.2019 |
(iii) |
(iii) Date of credit of payment in bank |
6.11.2019 |
Thus, in the above case, the time of supply of services shall be 28.10.2019, being the earlier of three dates specified above.
(3) Time of Supply of Services which are Taxable on Reverse Charge Basis [Section I3(3)]
In case of supply of services in respect of which lax is paid or liable to be paid on reverse charge basis by the recipient (except on services received from associated enterprises located outside India), the time of supply shall be the earlier of the following dates, namely:—
(a) 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 |
(b) the date immediately following 60 days from the date of issue of invoice or any other document, by whatever name called, in lieu thereof by the supplier:
It means that the 61st. day from the date of issuance of invoice by the supplier shall be the second date specified in clause (b). |
Where it is not possible to determine the time of supply under clause (a) or clause (b) above, the time of
supply shall be the date of entry in the books of account of the recipient of supply.
Example :
Mrs. R receives supply of services from nontaxable territory in respect of which tax is liable to be paid on Reverse Charge Basis by her. Further, she provides the following information:
(a) |
Date of payment as entered in her books of account |
23.10.2019 |
(b) |
The date on which payment is debited in her bank account |
1.11.2019 |
(c) |
Date of issue of invoice |
1.10.2019 |
(d) |
The date immediately following 60 days from the date of issue of invoice |
1.12.2019 |
Solutions :
In the above case, the time of supply shall be earlier of the following dates:
| (i) |
Date of payment as entered in her books of account |
23.10.2019 |
(ii) |
The date on which payment is debited in her bank account |
1.11.2019 |
(iii) |
The date immediately following 60 days from the date of issue of invoice |
1.12.2019 |
Thus the time of supply shall be 23.10.2019 |
