Time of Supply - Model GST
JULY 27, 2016
By Karthik IVRN
WITH GST around the corner, understanding concepts contained in the model law at this point becomes crucial. GST law revolves around the concept of SUPPLY. Although supply of goods and/or services triggers levy under GST, liability to pay tax would arise at the time of supply. In other words, merely establishing levy under GST would be of no consequence if it is not coupled with provisions for the time of supply, value of such supply and affixing liability on a person for payment of such tax. Time of supply thus assumes great importance.
Under the model GST law, time of supply is different for goods and services. For a transaction involving both supply of goods and services, time of supply will most likely occur at different points in time. Provisions contained in the model law in this regard, have been briefly outlined hereunder.
Time of Supply - Goods
Model GST law has provided for five broad situations in this regard.
1. General Rule
Earlier of :-
a. Date of actual removal/ making available goods to recipient; or
b. date of Supplier's invoice; or
c. date when Supplier receives payment*; or
d. date of recording receipt of goods as per recipient's books of accounts.
2. For supply of goods under Continuous Supply
a. Involving multiple statements of accounts or successive payments, time of supply would be the date of expiry of period to which such Statement of accounts or successive payments relate to.
b. In all other cases, time of supply would be earlier of date of Invoice or date of payment.
4. For goods sent on Consignment/ Return/ Approval/ Any other similar Basis
Earlier of :-
a. Date of information of sale of goods; or
b. six months from date of removal of the goods.
5. For all other cases Residuary Rule shall apply
Earlier of :-
a. Where periodical return is to be filed, Last date for filing of such return; or
b. In all other cases, date on which CGST/SGST is paid.
Time of Supply - Services
Model GST law has provided for five broad situations.
1. General Rule
a. Earlier of date of Invoice or payment, when invoice issued within prescribed period; or
b. earlier of date of completion of provision of service or receipt of payment, when invoice not issued within prescribed period; or
c. when (a) and (b) are not applicable, date when recipient records receipt of service in his books of accounts.
Note : Date of payment shall be earlier of Date of credit of payment into Bank Account or Date when payment is entered in the books of accounts
2. For Continuous Supply of Services
Case1 Last date for payment, if ascertainable from the contract. Issuance of invoice is not a criteria for this case.
Case 2 If due date not ascertainable, earlier of date of invoice or payment.
Case 3 If payment is linked to completion of an event, then such event.
The Central/ State Government on recommendation of the GST Council may notify services that will be treated as continuous supply of services.
3. When tax payable under Reverse Charge Mechanism
Earlier of :-
a. Date of receipt of services; or
b. date of payment to supplier; or
c. date of receipt of supplier's invoice; or
d. date of debit in books of accounts of the receiver.
For the purpose of this point, date of payment shall be earlier of Date of credit of payment into Bank Account or Date when payment is entered in the books of accounts.
4. If supply of services ceases under a contract before its completion, then services will be deemed to have been provided when the supply ceases.
5. For all other cases Residuary Rule shall apply
Earlier of :-
a. Where periodical return is to be filed, Last date for filing of such return; or
b. In all other cases, date on which CGST/SGST is paid.
Challenge
As outlined in 'General Rule' relating to Time of Supply of Goods and Time of Supply of Services , date of recording the supply in the books of the recipient will result as time of supply if it occurs earlier than all other scenarios given therein. Such a proposition poses a problem. How would the supplier know when such supplies have been recorded in the books of the recipient? It would be unfair to determine the time of supply in a manner whereby, the supplier has no control on what, how much and when the recipient records the suppliers in his books of accounts.
(The author is Associate with Lakshmikumaran & Sridharan, Chennai and the views expressed are strictly personal)
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