The current indirect taxation system (consisting of multiple taxes) is about to undergo a drastic change, with India’s new Goods and Services Tax (GST, a single taxation system for the entire country) being rolled out 1 July 2017. Many provisions are changing, 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.
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:
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)
B) When invoice is not issued within the prescribed period
C) Cases where above two provisions does not apply
|3||Supply with vouchers||The time of supply in case of voucher is:
|4||Reverse charge||Under reverse charge, the liability to pay tax is on the recipient of goods/services and not the supplier.|
The time of supply in case of goods shall be the earlier of:
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
The time of supply in case of services shall be the earlier of:
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:
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.
The time limit for issuing invoices varies under different scenarios:
Then, invoice should be issued within 45 days from the date of supply of service.
Then the invoice may be issued either:
The date of payment shall be earlier of:
Let’s apply the above provisions to a few examples to better understand how time of supply can vary:
|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
|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.
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.
There are two types of vouchers which can be issued by a shopkeeper namely single purpose voucher and general 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.
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.
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