Time of Supply under GST

Time of Supply

• Businesses must pay GST on all supplies of services, goods, or both within a taxable area.
• The time of supply law assists in determining when goods/services are deemed supplied.
• This determination is important for levying GST and setting payment due dates.
• A supply can involve many taxable/non-taxable events, for example agreements, dispatch, performance, delivery, book updates, and payments.
• The CGST Act of 2017, sections 12-14 and 31, deal with time of supply for determining GST taxability.

Pre-GST Taxation

• Supply is now a novel concept specifically for GST.
• The pre-GST system uses "point of taxation," meaning the time when tax must be paid for a taxable event.
• The current time of supply idea is influenced from this.
• Points of taxation according to tax type:
  • Central Excise: Manufacturing of goods.
  • VAT: Sale of goods.
  • Service Tax: Provision of services.
• Point of taxation under each tax type:
  • Central Excise: Removal of goods from manufacturing unit.
  • VAT: When sale takes place.
  • Service Tax: Occurs earliest of invoice issue date, payment receipt date, or within 30 days of service.

General Layout for Time of Supply Provisions

• Supply of goods/services is categorized differently with rules varying by nature.
• Section 12 relates to the time of supply for goods.
• Section 13 relates to the time of supply for services.
• Section 14 addresses changes in tax rates involving goods/services.
• Section 12 can be divided into:
  • Time of Supply for Goods - Forward Charge
  • Time of Supply for Goods – Reverse Charge
  • Time of Supply for Goods – Miscellaneous

Time of Supply of Goods (Section 12)

• The liability to pay tax arises at the time of supply, per the section rules.
• The time of supply is the earlier of these dates:
  • Invoice issued by the supplier or final date for invoice issuance under section 31.
  • The date the supplier receives payment.
• If the supplier of taxable goods receives upto one thousand rupees in excess of amount indicated on the tax invoice, the time of supply shall be, at the option of the supplier, the date of issue of invoice in respect of such excess amount.
• "Supply" is deemed made to the extent covered by invoice or payment.
• "Date on which the supplier receives the payment" is when payment is accounted for or credited, whichever occurs sooner.

Legislative Intent and Forward Charge (under 12(2))

• Legislative wants exclusive subject enactment.
• Section 12(1) means tax arises at time of supply, as determined in accordance.
• In usual transactions, the recipient pays tax to the supplier, who remits it to the government as a forward charge.
• The earliest events applicable are the date invoice issued or date payment received.
• For example, if goods left a facility on Feb 25, 2025, recipient gets them on March 1, 2025 etc, time of supply is Feb 27, 2025.
• Explanation 2 - “The date on which the supplier receives the payment" shall be the date on which the payment is entered in his books of account; or the date on which the payment is credited to his bank account, whichever is earlier.
• Example for invoice issued for 12 units priced at 10000 each, then time of supply is meant for Rs. 1,20,000.
• Supplier only supplies 10 units and receives payment of Rs. 100,000, then the time of supply is deemed to be for only Rs. 100,000.
• This applies to "or the last date on which he is required, under section 31, to issue the invoice with respect to the supply".
• When there is no payment/issue date of invoice, section 31 provides last issue date as time of supply.
• Section 31(1) requires registered supplier of taxable goods to supply goods before or at time of supply to recipient involving goods movement.
• Delivery of goods or making available to the recipient in other cases.
• Supplier sells his business to the recipient including the inventory on 24 Feb by surrendering the keys then time of supply will be 24 Feb.
• Must issue a tax invoice showing description, quantity, and value of goods.

Reverse Charge (under 12(3))

• For supplies taxed on a reverse charge basis, the time of supply is the earliest of:
  • The date of receipt of goods.
  • The date of payment as entered in recipient's books or bank account, whichever is earlier.
  • Thirty days following the invoice issued by the supplier.
• Where determining the time of supply is impossible under the above three clauses, it defaults to the date of entry in the recipient's books.
• In reverse charge, recipient pays tax since supplier is non-registered.
• Tax is earliest of the following:
  • Receipt date of goods
  • Payment date
  • 30 days following invoice

Vouchers (under 12(4))

• For the supply of vouchers, the time of supply will be:
  • The date the voucher is issued, if the supply is identifiable at that point.
  • The date the voucher is redeemed, for all other cases.
• A voucher obligates the supplier to accept it for goods/services supply.
• Vouchers must not be legal tender or actionable claims.
• They can act as payment substitutes.
• Vouchers can also be pre-paid payment instruments (PPIs)
• The "date of issue" on the voucher represents identifiable supply.

Premier Sales Promotion Pvt Ltd vs UOI & ors HC of Karnataka

• A registered company procures, and supplies vouchers and e-vouchers from issuers to clients for specified face value.
• Its clients issue vouchers in the form of incentive under promotional schemes for the purchase of goods/services.
• The assessee submits an application before Karnataka AAR in Feb 2021.
• The issue before the AAR is if payment instruments or vouchers are taxable, also if the transaction is liable to tax.
• Karnataka AAR's ruling is that supplies for all 3 cases comes under GST Act 2017 section 12(5).
• The goods in schedules I, II, IV, V, or VI are to be taxed at 9%.
• The vouchers involved are PPIs for purchase of goods and services according RBI master direction of issuance and operation.
• Section 12(4)(b) of the CGST Act says if goods are unidentified, supply must be done on the date of redemption.
• the RBI recognizes them as 'payment instrument' so they are accepted a consideration for supply of goods/and services.
• The AAR/ high court held the petitioner cannot be liable to pay on “Gift Voucher/Card" as per Section 7(2)(a) r/w Sl.No.6 to Schedule III.

In re- Kalyan Jewellers

• The applicant deals with manufacturing/trading jewelry products.
• It issues vouchers or gift cards as part of sales promotions.
• Determining whether supply of such gift vouchers is the same supply of goods/services is key.
• Determining if time supply would coincide with the issue of PPIs is key.
• It was held if voucher recognized by RBI it is considered money, when voucher identifies service the redeeming happens at voucher issue.
• As there is gold transfers will not be subject to GST since deemed issue has already been done.

Circular No. 243/37/2024-GST

• Subject: Clarification GST treatment of vouchers
• “Voucher” may be a payment instrument, issuing payment instruments is under RBI guidelines.
• Per section 2(75) CGST Act, money includes any instrument to settle an obligation.
• The combined descriptions given by the RBI says where a voucher is for money the transactions will neither be goods nor service.
• Where a voucher is a non approved instrument the good will be considered an "actionable claim" under CGST, the transaction in vouchers will always never be supply.
• Even if the voucher isn't covered the "Supply" it can still be charged under GST.

Section 13. Time of Supply of Services-

• The liability to pay tax on services occurs at the time of supply per section rules.
• The time of supply of services is the earliest of the following dates:
  • Date invoice is provided or receipt of payment, whichever is earlier.
  • Service provision date or payment receipt date, whichever is earlier, or if section is not applicable apply next provision.
  • The date the recipient documents the receipt of services where all previous clauses are irrelavent.

Forward and Reverse Charges Under Section 13

• Time of supply shall be the earliest of the following dates:
  • The date of issue of invoice by the supplier if the invoice is issued within the period prescribed under Sec 31(2).
  • The date of receipt of payment whichever is earlier;
• Persons supplying taxable services shall issue a tax invoice based under rule 46 based under 30 days.
• Where 31(2) not applicable the date which the services are showed in accounts are applied.
• Reverse Charge: in reverse charged based time, early liability date applies.
  • Payment applied date.
  • Payment charted date.
• Under clauses a & b or not determinable, time of service apply when recipient records.

Supply of Vouchers 13(4)

• Supply time is done by supplier is time of issue if supply identified is that point.
• The time of Redemption happens in every other case.