Time of Supply of Goods and Services under GST Explained

Last Update Date : October 30, 2018

The former indirect taxation system (consisting of multiple taxes) underwent a drastic change when Goods and Services Tax (GST, a single taxation system for the entire country) was rolled out on 1 July 2017.  Many provisions changed, including the concept of point of taxation – the point in time when goods and/or services are deemed to have been provided and when the tax liability can be determined. This guide by earlyGST talks in details about the concept of time of supply under GST.

time of supply under gst

What is Time of Supply?

Time of supply helps us to determine when the tax liability arises i.e., the date when the event which gives rise to GST liability has occurred.

Under the pre- GST regime, the point of taxation used to differ for each tax type:

  • Manufacturing of goods: The liability to pay tax arises at the time goods are removed from the factory/excise unit
  • Services: The date of receipt of payment or date of issue of invoice, whichever is earlier
  • Sale of goods: The liability to pay tax arises on the sale of goods with both interstate CST and intrastate VAT.

Under GST, the time of supply varies based on the type of transaction. Various provisions related to each are outlined below.

S. No. Transaction type Treatment under GST
1 Goods (Default Rule) Time of supply shall be the earlier of*:
A) The date of issue of an invoice by the supplier or the last date on which he is required to issue an invoice
B) The date of receipt of payment by the supplier with regard to the supply
2 Services (Default Rule) Time of supply shall be the earlier of:
A) When is issued within prescribed period under section 31(2)

  • The date of issue of an invoice by the supplier or.
  • The date of receipt of payment.

B) When invoice is not issued within the prescribed period

  • Date of provision of service or,
  • Date of receipt of payment.

C) Cases where above two provisions does not apply

  • Date on which the recipient shows the receipt of service in his books of account.
3 Supply with vouchers The time of supply in case of voucher is:

  • The date of issue of a voucher, if the supply can be identified at that point i.e., in the case of Single Purpose voucher
  • The date of redemption of a voucher, in all other cases (General purpose voucher).
4 Reverse charge Under reverse charge, the liability to pay tax is on the recipient of goods/services and not the supplier.
GOODS
The time of supply in case of goods shall be the earlier of:

  • The date of receipt of goods
  • The date on which the payment is made
  • The date immediately following 30 days from the date the supplier issues the invoice

Note: If it is not possible to determine the time of supply in the above manner, then the time of supply is the date of entry in the books of accounts of the recipient of supply

SERVICES
The time of supply in case of services shall be the earlier of:

  • 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
  • Date immediately following 60 days from the date the supplier issues the invoice

Note: if it is not possible to determine the time of supply in the above manner, then the time of supply is the date of entry in the books of accounts of the recipient of supply.

5 Residue method If the time of supply of goods/services cannot be determined using any of the above methods, then the residue method applies.
This means that the time of supply of goods would be:

  • the due date of filing GST return, if the return has to be filed
  • or, the date of payment of Tax, if the return has not be filed

Receipt of amount in Excess of Rs 1,000 Time of Supply in Case of Excess Taxable Goods

If a supplier receives taxable goods which in value exceed by more than Rs 1,000 from the amount mentioned in the associated tax invoice, then at the discretion of the supplier, the date of issue of invoice can be considered as the time of supply.

What is the Time Limit for Issuing the Tax Invoice?

The time limit for issuing invoices varies under different scenarios:

Scenario 1: In case of taxable supply of services:

  • Invoice should be issued within 30 days from the date of supply of service.

Scenario 2: In case the supplier is any of the following:

  • An insurer
  • A banking company
  • A financial institution
  • A non-banking financial company

Then, invoice should be issued within 45 days from the date of supply of service.

Scenario 3: In case taxable supplies are made between distinct persons by suppliers like:

  • An insurer
  • A banking company
  • A financial institution
  • A non-banking financial company
  • A telecom operator
  • Any other class of supplier as may be notified by the Government

Then the invoice may be issued either:

  • before or at the time such supply is recorded by the supplier in his books of accounts
  • or, before the end of the quarter during which such supply was made

What is date of receipt of payment?

The date of payment shall be earlier of:

  • the date on which the recipient entered the payment in his books
  • or, the date on which the payment is credited to his bank account.

Let’s apply the above provisions to a few examples to better understand how time of supply can vary:

Example 1

Date of invoice Receipt of payment entered in books of account Receipt of payment credited to bank account Time of supply of goods
11 October, 2017 30 September, 2017 3 October, 2017 30 September,2017

Since the date of entry into the books is earlier than the date of credit to the bank account, the date of payment will be 30 September, 2017

Example 2

Date of invoice Receipt of payment Time of supply of goods
5 October, 2017 30 August, 2017 30 August, 2017

Example 3 : Reverse charge

Date of invoice Receipt of goods Date of payment Time of supply of goods
28 August, 2017 5 September, 2017 26 August, 2017 26 August, 2017
24 August, 2017 1 July, 2017 28 August, 2017 1 July, 2017

These provisions for determining the time of supply will be entirely new for taxpayers, especially for VAT and excise payers. Small businesses, too, will face many hurdles in adapting to the new law – GST guidelines are far more onerous than what they face today.

Frequently Asked Questions

What is a Voucher?

A voucher has been defined in the CGST Act as an instrument where there is an obligation to accept it as consideration or part consideration for a supply of goods or services or both, and where the goods or services or both to be supplied or the identities of their potential suppliers are either indicated on the instrument itself or in related documentation, including the terms and conditions of use of such instrument.

What are the Types of Vouchers?

There are two types of vouchers which can be issued by a shopkeeper namely single purpose voucher and general purpose voucher.

What is a Single Purpose Voucher?

A shopkeeper may issue vouchers for a specific supply i.e. supply which is identifiable at the time of issuance of voucher. In trade parlance, these are known as single purpose vouchers. For example, vouchers for pressure cookers or television or for spa or haircut.

What is a General Purpose Voucher?

A voucher can be a general purpose voucher which can be used for multiple purposes. e.g., a Rs 2,000 voucher issued by Shopper’s Stop store can be used for buying any product or service at any Shopper’s Stop store.

What is the Time of Supply of Services in Case of Supply by Associated Enterprises located outside India?

The time of supply in this case will be:

  • the date on which the recipient entered the payment in his books, or
  • the date on which the payment is credited whichever is earlier.

What will the Time of Supply be if there is a Change in Tax Rate?

Where supplies have been supplied before the change in tax rate:

Cases Invoice is issued in relation to change in rate of Tax Payment received in relation to change  in rate of Tax Time Of Supply
Case 1 Invoice issued prior Payment received prior Date of receipt of payment or date of issue of invoice,(whichever is earlier)
Case 2 Invoice issued prior Payment received after Date of receipt of payment
Case 3 Invoice issued after Payment received prior Date of issue of invoice

 

Where supplies have been supplied after the change in tax rate:

Cases Invoice is issued in relation to change in rate of tax Payment received in relation to change  in rate of tax Time of supply
Case 1 Invoice issued prior Payment received prior Date of receipt of payment or date of issue of invoice,(whichever is earlier)
Case 2 Invoice issued prior Payment received after Date of receipt of payment
Case 3 Invoice issued after Payment received prior Date of issue of invoice

Note: The date of receipt of payment will be the date of credit in the bank account. In case such credit in the bank account is after 4 working days from the date of change in the rate of tax, then “The date of receipt of payment” will 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.

What about the receipt of interest, late fee or penalty?

According to, section 13(6) of the GST act specifies that interest, late fee or penalty for delayed payments for any consideration for any supply will be included in the transaction value. For instance , a supplier receives consideration in the month of September instead of due date of July and for such delay an interest amount of Rs 1,000 can be received on or by 15 December 2017. Here, the time of supply of such amount will be 15 December 2017 i.e. the date on which it is received by the supplier and tax liability on the same would be discharged by 20 January 2018.

If it is not possible to determine the time of supply, then it will be:

  • the date on which a periodical return has to be filed, or
  • the date on which the CGST/SGST is paid, in any other case.

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