8

C H A P T E R

TIME OF SUPPLY
LEARNING OBJECTIVES 8.1 INTRODUCTION

After studying this chapter, you shall
be able to understand the following:
 Time of Supply of Goods
 Where supplier is liable
 Under Reverse Charge Mecha-
nism
The GST is payable on supply. This supply may be of goods
or services or both. A supply consists of various elements
that can be separated in time like when:
(1) An agreement to supply of goods or services is made.
(2) The services are rendered or the goods are delivered.
(3) The invoice is issued.

Supply through Vouchers (4) The payment is made.

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 Residual cases (5) The due date for issue of invoice arises.

 Time of Services Now, a question arises at which of the above points of time
will GST become payable? The concept of time of supply
 Time of Supply for Interest, Pen- provides answers to all such and other questions that arise
alty amount, etc. on the timing of the liability to pat GST.
 Time of Supply in case of Change
in Rate of Tax 8.2 MEANING OF TIME OF SUPPLY
The time of supply means the point in time when a supply
shall be deemed to have been provided. This determines the
time when the liability to pay would arise. In other words,
the time of supply fixes the point in time when the liability
to pay tax arises. The supply under GST includes both goods
and services. The CGST Act provides separate provisions for
the supply of goods (vide section 12) and supply of services
(vide section 13).

109
 Para 8.3 Time of Supply 110

The following cases are to be covered in this regard:

TIME OF SUPPLY (TOS)

TOS of Goods TOS of Services

1. Under Forward Charge 1. Under Forward Charge

2. Under Reverse Charge 2. Under Reverse Charge
3. For Exchangeable Voucher of Goods 3. For Exchangeable Voucher of Services
4. Residual Cases. 4. Residual Cases.

Section 12 Section 13

8.3 KEY CONCEPTS FOR UNDERSTANDING TIME OF SUPPLY (TOS)

The time of supply under GST has been linked with events like issue of invoice, receipt of payment,
due date of issue of invoice, etc. The basic philosophy of time of supply, as appears from the provisions,
reflects that the law desires to collect the tax to the earliest possible time. Before analyzing the related
statutory provisions given in sections 12 and 13, there are certain terms and concepts which must
be understood first. These points have been discussed here so as to maintain the significance and
depth of the specific provision.
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8.3.1 Forward and Reverse Charge

Usually the supplier is liable to pay tax, popularly called as Forward Charge. The Government is
empowered under section 9(3) of the CGST Act, to specify the categories of supply of goods and/or
services, the tax on which shall be paid by the recipient of such goods/services. When the liability
to pay tax lies with the recipient, instead of supplier, it is termed as Reverse Charge. (It has been
discussed in detail in Chapter 13)

8.3.2 Time Limit for issue of Invoice for supply of Goods

The provisions of time of supply lay down much emphasis on the fact whether or not the invoice
has been issued within the prescribed time limit. The related statutory provisions of section 31 have
been discussed in detail in Chapter 14. But, these have been given in brief in this Para, so that the
TOS provisions may be understood properly. The following are the rules:
As per section 31(1), the invoice needs to be issued either before or at the time of removal (where
supply involves movement of goods) of goods/delivery of goods/making goods available to recipient.
u In case of continuous supply of goods, the invoice should be issued before or at the time of
issuance of periodical statement/receipt of periodical payment [Section 31(4)].
u In case of goods sent or taken on approval for sale or return, invoice should be issued before
or at the time of supply or 6 months from the date of removal, whichever is earlier [Section
31(7)].
(You may refer Chapter 14 for detailed provisions in this regard.)

8.3.3 Time Limit for issue of Invoice for supply of Services

The miscellaneous provisions relating to time limit for issuance of invoice for supply of services
are as follows:
111 Key concepts for understanding TOS Para 8.3

(1) As per section 31(2) read with rule 47 of CGST Rules, the tax invoice needs to be issued either
before the provision of service or within 30 days from the date of supply of service. This limit
of 30 days is 45 days in case of insurance companies/banking companies/financial institutions
including NBFCs.
(2) In case of cessation of supply of services before completion of supply, the invoice (to the ex-
tent of the supply made before such cessation) should be issued at the time when the supply
ceases.
(3) In case of continuous supply of services, the invoice should be issued either
(i) On/before the due date of payment or
(ii) Before/at the time when the supplier of service receives the payment
(iii) On/before the date of completion of the milestone event when the payment is linked
to completion of an event.
(4) The invoice may be issued before or at the time of recording of supply in the books of account
or before the expiry of the quarter during which the supply was made, in case of following:
u Insurance companies
u Banking companies
u Financial institutions including NBFCs
u Telecom companies
u Notified supplier of services making taxable supplies between distinct persons (as spec-

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ified in section 25).
(The Chapter 14 contains the detailed provisions in this regard.)

8.3.4 Date of Receipt of Payment

In case of forward charge, where the supplier is liable to pay tax, the date at which payment has
been received by the supplier is very important. As per the Explanation 2 to section 12(2), “the date
on which the supplier receives the payment” shall be the date on which the payment is entered in
his books of account or the date on which the payment is credited to his bank account, whichever
is earlier.
In other words, the date of receipt of payment refers to the date on which the payment is recorded
in the books of account of the entity (supplier of goods) that receives the payment, or the date, on
which the payment is credited to the entity’s bank account, whichever is earlier. Therefore, the date
of receipt of payment is earlier of the following:
(i) The date on which the payment is entered in the books of account of the supplier
(ii) That date on which the payment is credited in his bank account.

Example 8.1:
Mr. X, a registered supplier received an advance of ` 5,00,000 along with the purchase order on 15-1-2018.
This advance payment was entered in the books of account on 16-1-2018 and credited in his bank account
on 18-1-2018. The time of receipt of payment shall be earliest of entry in the books (16-1-2018) and credit in
bank account (18-1-2018). Therefore, the date of receipt of payment will be taken as 16-1-2018.

8.3.5 Date of Payment

In case of Reverse Charge, the recipient is liable to pay tax. The time of such supply gives importance
to the date at which payment has been made by the recipient. In this regard, the date of payment
refers to the date on which the payment is recorded in the books of account of the entity that
 Para 8.4 Time of Supply 112

receives the service (recipient of service), or the date on which the payment is debited from the
entity’s bank account, whichever is earlier. Therefore, the date of payment is earlier of the following:
(i) The date of payment as entered in the books of account of the recipient
(ii) That date on which the payment is debited in his bank account.

Example 8.2:
Mr. B, a registered person, has purchased goods from Mr. S. The tax in respect of these goods is liable to
be paid on Reverse Charge Basis. Mr. B made payment on 21-1-2018 and the same was entered by the
accountant in the books of Mr. B on 22-1-2018. On 24-1-2018, the payment is debited in the bank account
of Mr. B. The time of payment shall be earliest of entry in the books (22-12-2017) and debit in bank account
(24-1-2018). Therefore, the date of payment will be taken as 22-1-2018.

8.3.6 Vouchers
The statutory provision of sections 12(4) and 13(4) uses the words “In case of supply of vouchers by
suppler …..” The “Voucher” here should not be understood in the common parlance as the accounting
voucher or related term used in auditing. Rather, under GST laws, the vouchers are instruments
that can be exchanged as payment for goods or services of the designated value. As per section
2(118), Voucher means 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. It
is important to note that for TOS, the vouchers may be divided into two categories:
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(a) Where supply is identifiable against the Voucher:

This category of vouchers includes those vouchers wherein the supply against the vouchers
is known at the time of issue of voucher.

Example 8.3:
Haldiram has opened a new outlet at Laxmi Nagar, Delhi. It has issued a voucher for deluxe thali worth
` 450 to first 20 customers. Now, in this case, we know that the supplier (i.e. Haldiram) will provide the
specific supply of deluxe thali against the voucher. Hence, the supply of this voucher is identifiable.
(b) Where supply is NOT identifiable against the Voucher:
This category covers all those vouchers against which the goods or services to be provided are
not known at the time of issue of voucher. The reason being the number of goods/services
are available, any of which may be used to redeem the voucher.

Example 8.4:
The Paschim Vihar branch of Easy-day, a departmental store, has issued vouchers worth ` 2,000 which
can be redeemed against purchase of any goods available in the store. The departmental store has
various types of goods with varying rates of GST. Here, we don’t know the particular goods which the
customer will buy to redeem the voucher. Therefore, for this voucher, the supply is not identifiable.
(The rules regarding TOS in case of Vouchers have been discussed under Paras 8.12 and 8.15
of the chapter.)

8.4 TIME OF SUPPLY OF GOODS [Section 12]

The liability to pay tax on goods shall arise at the time of supply (TOS) as determined in accordance
with the provisions of section 12 of CGST Act, 2017. This section covers the determination of time
of supply in the following situations:
(a) Supply of goods where supplier is liable to pay tax [Section 12(2)]
113 Time of supply of goods Para 8.4

(b) Receipt of goods that are taxable under Reverse Charge [Section 12(3)]
(c) Supply of Vouchers [Section 12(4)]
(d) Residual Cases [Section 12(5)]
(e) Addition to the value of Supply [Section 12(6)]

8.4.1 TOS for Supply of Goods (Forward Charge)[Section 12(2)]

As per section 12(2) of CGST Act, 2017, where the supplier is liable to pay tax under forward charge,
the time of supply of goods shall be the earlier of the following dates, namely:-
Condition A:
The date of issue of invoice by the supplier or the last date on which he is required, under section
31(1), to issue the invoice with respect to the supply; or
Condition B:
The date on which the supplier receives the payment with respect to the supply:
(The determination of last date for issue of invoice and determination of date of payment have
been discussed in Para 8.3.2 and Para 8.3.4 of the same chapter)

Example 8.5:[Invoice issued within Time Limit]

Kamal has supplied goods to Mr. X on 24-12-2017. The invoice had already been raised on 22-12-2017.
Mr. X has paid the due amount on 29-12-2017. The receipt was entered in books of account by Kamal on
30-12-2017. But, the same was credited in his bank account on 2-1-2018. In this case, the time of supply shall

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be earliest of the following:

(a) Date of issue of actual invoice (Since issued within time limit) 22-12-2017
(b) Date of payment entered in the books of account 30-12-2017
(c) Date on which amount credited in bank account 2-1-2018
Time of Supply (Earliest) 22-12-2017

Example 8.6: [Invoice issued AFTER expiry of Time Limit]

In above example, if invoice was raised on 27-12-2017, then this date of issue of actual invoice shall not be
used. Rather, the last date on which the invoice was required to be issued as per section 31(1) i.e. 24-12-2017
would be considered as follows.

(a) Last Date for issue of invoice as per section 31(1) 24-12-2017
(Since issued was not issued within time limit)
(b) Date of payment entered in the books of account 30-12-2017
(c) Date on which amount credited in bank account 2-1-2018
Time of Supply (Earliest) 24-12-2017

When Advance is received in respect of supply of Goods

In normal circumstances, if advance is received by the supplier from recipients of goods, then date
of payment will be before the issue of invoice. Accordingly, the date of receipt of advance will be
the time of supply to the extent of such advance. But, as per Government Notification (Given in
box), the date of receipt of advance will not be considered if aggregate turnover in preceding FY
did not exceed ` 1.5 crores.