Time of Supply of Goods Under GST Explained

Goods and Services Tax (GST) is an indirect tax that makes India’s tax system easier. Time of Supply which is a very crucial part of GST. This concept defines the moment at which output is considered to be supplied. Once it’s determined, it becomes the tax liability. Understanding the Time of Supply in GST helps businesses comply with the rules effectively.

What is the Time of Supply in GST?

The Time of Supply in GST refers to the date when a taxable event occurs under GST. It plays a key role in determining:

• The applicable GST rate
• The due date for tax payment
• Filing of GST returns

The time of supply for goods and services is determined under Section 12, 13 & 14 of CGST Act, 2017 as per GST law.

Time of Supply for Goods

For the supply of goods, the default rule is that the time of supply under GST is the earliest of the following events:

• Date of issue of the invoice: The date of invoice is the date on which invoice is issued (i.e. before or at the time of removal of goods) if the invoice is issued within a prescribed time. The last date on which the invoice should actually have been issued is considered, if the invoice is not issued within the prescribed time.
• Date of receipt of payment: This means the date on which the payment is recorded in the supplier’s books of account or to what account payment is credited with respect to the supplier.

Example:

Let’s say a supplier issues an invoice on 10th January and receives payment on 8th January, the supplier can declare the time of supply to be 8th January, because this is the earlier date.

Special Scenarios for Time of Supply

Advance Payment:

Taxpayers (except the composition dealers) have been exempted from paying GST on advance received for supply of goods under Notification No. 66/2017-Central Tax. You will only be paying GST when you issue an invoice.

Reverse Charge Mechanism (RCM):

In cases where the recipient is liable to pay GST under RCM, the time of supply in GST is the earliest of:

• Date of receipt of goods
• Date of payment entry in the books or debit to the bank account
• 30 days from the invoice date (or any other relevant document)

Example:

If goods are received on 5th February, the payment is recorded on 10th February, and invoice date is 1st February, then, time of supply is 5th February.

Time of Supply in Specific Situations

1. Change in GST Rates:

When the GST rate changes, the time of supply determines whether the old or new rate applies. The scenarios are as follows:

2. Vouchers

For single-purpose vouchers (specific supply identifiable at issuance), the time of supply under GST is the date of issue.
For multi-purpose vouchers (general usage), the time of supply is the date of redemption.

3. Interest, Late Fees, or Penalty

Any addition to the value of supply (e.g., interest for late payment) is taxed at the time the additional amount is received.

Importance of Time of Supply for Businesses

• Avoidance of Penalties

Non-compliance with the time of supply under GST rules can lead to penalties and interest on delayed payments.

• Accurate GST Payment

Identifying the correct time of supply in GST ensures proper GST calculation and filing.

• Simplified Accounting

Timely identification helps reconcile invoices and payments effectively.
 

Conclusion

The concept of time of supply in GST ensures tax liabilities are accurately determined. Businesses must stay informed about GST provisions to avoid errors. For goods, the default rule is based on the earliest of the invoice or payment date. Exceptions like reverse charge, vouchers, and rate changes have specific provisions.
By understanding and adhering to these rules, businesses can achieve smooth compliance with GST laws.

FAQs 

• What is the "Time of Supply" in GST?
  Time of Supply' under GST means the point in time as when a supply is deemed to have been made. It decides when GST becomes a tax on any business, according to which businesses will have to pay and report taxes accordingly.
• What is the time of supply for goods?
  In respect of goods, the time of supply is the earliest of invoice date, last permissible invoice date or payment date. This enables true GST reporting period to be worked out.
• What is the time of supply for services?
  For services, time of supply is the earliest of the following dates: date of invoice, date of receipt of payment, or date of supply of the service (the service is supplied at the date that the invoice is paid, even if the invoice is dated after supply). They also make sure you keep up with your tax reporting in a timely manner.
• How is the time of supply determined under the Reverse Charge Mechanism (RCM)?
  For goods, RCM provides that the time of supply would be earliest of the date of receipt of goods, payment date and 30 days from the date of invoice. Interchange charges – services are made within 60 days of the invoice date or the earliest of the payment date.
• What is the time of supply for vouchers?
  The time of supply for vouchers is when the supply is identifiable at issue. Where the time of supply is identifiable, the date of issue of the voucher; where not identifiable, the date of the voucher being redeemed.