What is meant by Time of Supply under GST?

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Time of supply

Table of Contents

1. Time of supply – How to determine and its significance

2. What are the rules for determination of time of supply of goods

3. What are the rules for determination of time of supply of services

4. How to find out time of supply in case of change in GST rate

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1. Time of supply – How to determine and its significance

The liability to pay GST on goods/services arises at the time of supply of goods and services. The time of supply fixes the point when the liability to charge GST arises. Due date of payment of GST depends upon time of supply. GST pertaining to supply of current month should be normally paid on monthly basis by 20th day of succeeding month.

Sections 12 and 13 provide parameters to find out time of supply of goods/services. Section 14 covers tax incidence when there is change in rate of tax in respect of supply of goods/services. To understand implication of these provisions, one should note down the following points –

1.1 Statutory time for issue of invoice in the case of taxable supply of goods

Section 31 covers time of issue of invoice in the case of supply of goods. Invoice is required to be prepared before or at the time of –

    1. removal of goods for supply to the recipient (where the supply involves movement of goods); or
    2. delivery of goods; or
    3. making available of goods to the recipient.

The obligation of the supplier of goods is to issue the invoice latest by performance of any of the above 3 activities. For instance, X dispatches goods to Y from his depot on November 12, 2021. X can issue invoice on or before November 12, 2021. The following points should be kept in view –

    • Continuous supply of goodsIn case of continuous supply of goods, where successive statements of accounts or successive payments are involved, the invoice shall be issued before or at the time each such statement is issued or each such payment is received.
    • Goods on approval Invoice of goods sent on approval is required to be issued –
      1. within 6 months from the date of removal of goods, or
      2. the date when recipient indicates that he has accepted the supply of goods, whichever is earlier.

1.2 Statutory time for issue of invoice in the case of taxable supply of services

Rule 47 covers time of issue of invoice in the case of taxable supply of services. Such invoice should be issued within 30 days from the date of supply of service. However, different time-limit is applicable in the following cases –

    1. When supplier of services is an insurer/banking company/financial institution/non-banking financial company, invoice can be issued within 45 days from the date of the supply of service.
    2. An insurer/banking company/financial institution/non-banking financial company/telecom operator, making taxable supplies of services between distinct persons (i.e., service provided by one branch to another branch) may issue the invoice before or at the time such supplier records the same in his books of account or before the expiry of the quarter during which the supply is made.
    • Continuous supply of services “Continuous supply of services” means a supply of services which is provided (or agreed to be provided) continuously or on recurrent basis, under a contract. Such a contract is for a period exceeding 3 months with periodic payment obligations. In the case of continuous supply of service –

Where the due date of payment is ascertainable from the contract, the invoice shall be issued on or before the due date of payment.

Where the due date of payment is not ascertainable from the contract, the invoice shall be issued before or at the time when the supplier of service receives the payment.

Where the payment is linked to the completion of an event, the invoice shall be issued on or before the date of completion of that event.

1.3 Date of receipt of payment

Generally, the date of receipt of payment is the date on which payment is entered in the books of account of the supplier or the date on which payment is credited to his bank account, whichever is earlier. For instance, X, the supplier of goods/services, receives a cheque on October 20, 2021. It is recorded in his books on October 21. It is sent for collection to the bank on October 22 and bank credit the same in the current account of X on October 23. The date of receipt of payment in this case is October 21, 2021 (i.e., the date of recording in the books of account or date of credit by bank, whichever is earlier).

    • Change in rate of tax in respect of supply of goods/services – The date of receipt of payment shall be the date of credit in the bank account, if such credit in the bank account is after 4 working days from the date of change in the rate of tax.

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2. What are the rules for determination of time of supply of goods

Time of supply of goods is given by section 12.

2.1 General rules [Sec. 12(2)]

Generally, time of supply of goods can be determined on the basis of following two events –

    • Event 1 – Date of issue of an invoice by the supplier (or the last date on which the supplier is required to issue invoice under section 31).
    • Event 2 – Date of receipt of payment by the supplier.

Time of supply of goods will be as follows –

Law applicable
During July 1, 2017 and October 12, 2017 [see Case 1 given below] During October 13, 2017 and November 14, 2017 On or after November 15, 2017 [see Case 2 given below]
Aggregate turnover of supplier Rs. 1.5 crore or less Aggregate turnover of supplier more than Rs. 1.5 crore
Time of supply is – Time of supply is – Time of supply is – Time of supply is –
Event 1; or Event 1 Event 1; or Event 1
Event 2, Event 2,
whichever is earlier (Event 2 is irrelevant)‡ whichever is earlier (Event 2 is irrelevant)‡

Conclusion – Time of supply is generally determined on the basis of invoice or payment, whichever is earlier. However, the Government has given a concession in the case of small taxpayers (having turnover of Rs. 1.5 crore or less) (with effect from October 13, 2017) and in the case of all taxpayers (with effect from November 15, 2017). After this concession, GST will be payable on the basis of date of invoice (not on the basis of advance payment) in the case of supply of goods (no such concession is given in the case of supply of services). However, in the case of a registered person (who has opted under section 10 for the Composition Scheme or Alternative Composition Scheme), time of supply is date of issue of invoice (i.e., Event 1) or date of receipt of payment (i.e., Event 2), whichever is earlier.

Provisions illustrated

Case 1 – The following data is noted from the records of X Ltd., a chemical manufacturer –

    1. It receives an order to supply 10,000 bags of caustic soda from A Ltd. on July 30, 2017.
    2. Along with order, an advance of Rs. 4 lakh is received on the same day.
    3. X Ltd. starts manufacture of the above goods on August 18, 2017 which is completed on August 26, 2017.
    4. X Ltd. completes packaging on August 27, 2017.
    5. On August 28, 2017, goods are sent from the factory to nearby depot of X Ltd. for inspection by A Ltd.
    6. Goods are inspected by the team of A Ltd. on August 29, 2017. On the same day, A Ltd. transfers Rs. 10 lakh as advance through NEFT credit in the SBI current account of X Ltd. (the same is recorded in the books of X Ltd. on September 1, 2017).
    7. Goods are delivered from depot to the agent of A Ltd. on August 30, 2017.
    8. Tax invoice is issued by X Ltd. on September 2, 2017.
    9. Balance payment (i.e., amount of invoice minus advance of Rs. 14 lakh) is received September 14, 2017.

In this case, law requires X Ltd. to issue invoice on or before August 30, 2017 (i.e., the date of delivery of goods to the recipient). Date of receipt of advance of Rs. 10 lakh is August 29, 2017 (i.e., the date of credit in bank account or date of recording the transaction in the books of X Ltd., whichever is earlier). Time of supply will be as follows –

Different activities Date of invoice (or last date when law requires to issue invoice) Date of payment Time of supply
Receipt of advance of Rs. 4 lakh August 30, 2017 July 30, 2017 July 30, 2017†
Receipt of advance of Rs. 10 lakh August 30, 2017 August 29, 2017 August 29, 2017‡
Final payment August 30, 2017 September 14, 2017 August 30, 2017‡

† GST should be paid on or before August 20, 2017 (i.e., 20th day of succeeding month).

‡ GST should be paid on or before September 20, 2017 (i.e., 20th day of succeeding month).

Case 2 The following data is noted from the records of Y Ltd., a synthetic silk manufacturing company (not covered by Composition Scheme/Alternative Composition Scheme) –

    1. It receives an order to supply 50,000 meters of synthetic silk from B Ltd. on November 30, 2021.
    2. Along with order, an advance of Rs. 5 lakh is received on the same day.
    3. Y Ltd. starts manufacture of the above goods on December 18, 2021 which is completed on December 26, 2021.
    4. Y Ltd. completes packaging on December 27, 2021.
    5. On December 28, 2021, goods are sent from the factory to nearby depot of Y Ltd. for inspection by B Ltd.
    6. Goods are inspected by the team of B Ltd. on December 29, 2021. On the same day, B Ltd. transfers Rs. 20 lakh as advance through NEFT credit in the SBI current account of Y Ltd.
    7. Goods are delivered from depot to the agent of B Ltd. on December 30, 2021.
    8. Tax invoice is issued by Y Ltd. on January 2, 2022.
    9. Balance payment (i.e., amount of invoice minus advance of Rs. 25 lakh) is received on January 14, 2022.

In this case, law requires Y Ltd. to issue invoice on or before December 30, 2021 (i.e., the date of delivery of goods to the recipient). Time of supply will be as follows –

Different activities Date of invoice (or last date when law requires to issue invoice) Date of payment Time of supply
Receipt of advance of Rs. 5 lakh December 30, 2021 Not to be considered December 30, 2021†
Receipt of advance of Rs. 20 lakh December 30, 2021 Not to be considered December 30, 2021†
Final payment December 30, 2021 Not to be considered December 30, 2021†

† GST should be paid on or before January 20, 2022 (i.e., 20th day of succeeding month).

2.2 Option in the case of advance up to Rs. 1,000

Where the supplier of taxable goods receives an amount up to Rs. 1,000 in excess of the amount indicated in the tax invoice, the time of supply to the extent of such excess amount shall, at the option of the said supplier, be the date of issue of invoice in respect of such excess amount.

  • Practical relevance of this option (if a person is not covered by Composition Scheme/Alternative Composition Scheme) – The Government has given a concession in the case of small suppliers of goods (having turnover of Rs. 1.5 crore or less) (with effect from October 13, 2017) and in the case of all suppliers of goods (with effect from November 15, 2017). After this concession, GST is not payable on the basis of payment or advance payment. Consequently, the aforesaid option does not have much practical utility (in the case of supply of goods) as is shown in the table given below –
Practical utility of the option in case of advance up to Rs. 1,000
During July 1, 2017 and October 12, 2017 During October 13, 2017 and November 14, 2017 On or after November 15, 2017
Aggregate turnover Rs. 1.5 croreor less Aggregate turnover more than Rs. 1.5 crore
Applicable Option not relevant Applicable Option not relevant

† It covers a registered person whose aggregate turnover in the financial year 2016-17 does not exceed Rs. 1.5 crore (or the registered person whose aggregate turnover in the year in which registration is obtained is likely to be less than Rs. 1.5 crore).

2.3 Continuous supply of goods

There is no special provision pertaining to time of supply in the case of continuous supply of goods. However, section 31(4) requires that in case of continuous supply of goods, where successive statements of accounts (or successive payments) are involved, the invoice shall be issued before or at the time each such statement is issued (or each such payment is received).

Provisions illustrated

Case 1 The following data is noted from the records of X Ltd. (supplier of paints through pipeline to Mar Udyog Ltd.) and Mar Udyog Ltd. (a car manufacturer, recipient of goods) –

    1. X Ltd. supplies paints through a pipeline from its factory to Mar Udyog Ltd.
    2. On July 31, 2017, X Ltd. gets advancepayment of Rs. 10,00,000 from Mar Udyog Ltd. for the quarter ending September 30, 2017 (invoice not issued).
    3. Similar payment of Rs. 10,00,000 is received on August 31, 2017 and September 30, 2017 (no invoice issued)
    4. On October 3, 2017, X Ltd. issues invoice for the quarter ending September 30, 2017 (total amount including GST : Rs. 40,50,000 minus advance of Rs. 30,00,000, balance due Rs. 10,50,000).
    5. On October 10, 2017, X Ltd. gets payment of Rs. 10,50,000

In this case, law requires X Ltd. to issue invoice at the time of receipt of advance (or before). Time of supply of goods will be as follows –

Different activities (receipt of payment, issue of bill) Date of invoice Last date to issue invoice (statutory requirement) Date of payment Time of supply [(2), (3), (4), whichever is earlier]
(1) (2) (3) (4) (5)
Rs. 10,00,000 (July 31, 2017) July 31, 2017 July 31, 2017 July 31, 2017‡
Rs. 10,00,000 (August 31, 2017) August 31, 2017 August 31, 2017 August 31, 2017††
Rs. 10,00,000 (September 30, 2017) Sept. 30, 2017 Sept. 30, 2017 Sept. 30, 2017#
Invoice (October 3, 2017) (balance due Rs. 10,50,000) October 3, 2017 October 10, 2017 October 3, 2017$

‡ GST should be paid on or before August 20, 2017 (i.e., 20th day of succeeding month).

†† GST should be paid on or before September 20, 2017 (i.e., 20th day of succeeding month).

# GST should be paid on or before October 20, 2017 (i.e., 20th day of succeeding month).

$ GST should be paid on or before November 20, 2017 (i.e., 20th day of succeeding month).

Case 2 – The following data is noted from the records of Y Ltd. (supplier of paints through pipeline to Mar Udyog Ltd.) and Mar Udyog Ltd. (a car manufacturer, recipient of goods) –

    1. Y Ltd. supplies paints through a pipeline from its factory to Mar Udyog Ltd.
    2. On November 30, 2021, Y Ltd. gets advancepayment of Rs. 10,00,000 from Mar Udyog Ltd. for three months period ending January 31, 2022 (invoice not issued).
    3. Similar payment of Rs. 10,00,000 is received on December 31, 2021 and January 31, 2022 (no invoice issued)
    4. On February 3, 2022, Y Ltd. issues invoice for the three month period ending January 31, 2022 (total amount including GST : Rs. 40,50,000 minus advance of Rs. 30,00,000, balance due Rs. 10,50,000).
    5. On February 10, 2022, Y Ltd. gets payment of Rs. 10,50,000

In this case, law requires Y Ltd. to issue invoice at the time of receipt of advance (or before). Time of supply of goods will be as follows –

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Different activities (receipt of payment, issue of bill) Date of invoice Last date to issue invoice (statutory requirement) Date of payment Time of supply [(2), (3), (4), whichever is earlier]
(1) (2) (3) (4) (5)
Rs. 10,00,000 (November 30, 2021) November 30, 2021 Not to be considered November 30, 2021‡
Rs. 10,00,000 (December 31, 2021) December 31, 2021 Not to be considered December 31, 2021††
Rs. 10,00,000 (January 31, 2022) January 31, 2022 Not to be considered January 31, 2022#