Time of Supply Rules under Model GST Law

Under the new GST Model Law the incidence of taxation is supply of Goods and Services. It becomes important to determine the point of taxation i.e. the time of supply in order to levy the GST upon the assessee.

Section 3 of the Model Law defines Supply as:

(1) Supply includes

(a) all forms of supply of goods and/or services such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business,

(b) importation of service, whether or not for a consideration and whether or not in the course or furtherance of business, and

(c) a supply specified in Schedule I, made or agreed to be made without a consideration.

(2) Schedule II, in respect of matters mentioned therein, shall apply for determining what is, or is to be treated as a supply of goods or a supply of services.

(2A) Where a person acting as an agent who, for an agreed commission or brokerage, either supplies or receives any goods and/or services on behalf of any principal, the transaction between such principal and agent shall be deemed to be a supply.

(3) Subject to sub-section (2), the Central or a State Government may, upon recommendation of the Council, specify, by notification, the transactions that are to be treated as—

(i) a supply of goods and not as a supply of services; or
(ii) a supply of services and not as a supply of goods; or
(iii) neither a supply of goods nor a supply of services.

(4) Notwithstanding anything contained in sub-section (1), the supply of any branded service by an aggregator, as defined in section 43B, under a brand name or trade name owned by him shall be deemed to be a supply of the said service by the said aggregator.

Analysis of the definition of term- “Supply”

Following are the important constituents of Supply:

1. In case of Normal Supply:

1. There must be actual provisions of goods/services by either sale, barter , Exchange etc. ; for
2. A Consideration by a person;
3. In the course of furtherance of business as defined in section 2 (17) of Model GST Law.

2. Where the Goods/Services are Imported, GST would be applicable irrespective of consideration or used in furtherance of business or not.

In this scenario where the point of taxation is “Supply”, it is important to consider the “Time of Supply” in order to determine the time at which such supply will be taxable under GST.
Time of Supply of Goods:

1. As per section 12 the liability  to pay CGST/SGST shall arise at the time of supply as determined in terms of the provisions of this section:
2. Time of Supply of Goods shall be the earliest of :

In case of normal supply of goods.

1. Date of removal of goods, if the goods are required to be removed; or
2. Date of availability of goods to recipient, where the goods are not required to be removed.

2. The date on which the supplier issues the invoice with respect to supply; or
3. The date on which the supplier receives the payment with respect to supply ; or
4. The date on which the recipient shows the receipt of goods in his books of accounts.

Time of Supply of Goods can be understood by following illustration:

In case of continuous supply of Goods

In case of continuous supply of goods, where successive statements of accounts or successive payments are involved, the time of supply shall be the date of expiry of the period to which such successive statements of accounts or successive payments relate.

If there are no successive statements of account, the date of issue of the invoice (or any other document) or the date of receipt of payment, whichever is earlier, shall be the time of supply.

Time of Supply in case of Reverse Charge:

In case of supplies in respect of which tax is paid or liable to be paid on reverse charge basis, the time of supply shall be the earliest of the following dates, namely—

(a) the date of the receipt of goods, or
(b) the date on which the payment is made, or
(c) the date of receipt of invoice, or
(d) the date of debit in the books of accounts.
 

Time of Supply of Services:  

1. As per section 13 the liability  to pay CGST/SGST shall arise at the time of supply as determined in terms of the provisions of this section:
2. Time of Supply of Services shall be:

i) In cases where Invoice is issued in prescribed time

Earliest of:

1. the date of issue of invoice; or
2. the date of receipt of payment; or

ii) In cases where Invoice is issued in prescribed time

Earliest of:

1. the date of completion of the provision of service; or
2. the date of receipt of payment, ; or

iii) the date on which the recipient shows the receipt of services in his books of account, in a case where the provisions of clause (i) or (ii) do not apply.
Time of Supply of Services can be understood by following illustration:

In case of continuous supply of Services

a) where the due date of payment is ascertainable from the contract:

Earliest of:

1. the date on which the payment is liable to be made by the recipient of service, whether or not any invoice has been issued; or
2. any payment has been received by the supplier of service;

b) where the due date of payment is not ascertainable from the contract:

Earliest of:

1. each such time when the supplier of service receives the payment, or
2. issues an invoice;

c) where the payment is linked to the completion of an event, the time of completion of that event;

Time of Supply in case of Reverse Charge:

In case of supplies in respect of which tax is paid or liable to be paid on reverse charge basis, the time of supply shall be the earliest of the following dates, namely—

(a) the date of the receipt of services, or
(b) the date on which the payment is made, or
(c) the date of receipt of invoice, or
(d) the date of debit in the books of accounts.

Keshav R Garg
(B.Com, CA, CS, ISA(ICAI))