In this article, we will discuss comprehensively about Time of Supply in respect of Goods i.e. time when GST liability arise in case of supply of goods as per the provisions of Law.
Area Covered in the Article
Time of Supply of Goods under Forward Charge (Section 12)
As per Section 12, Time of Supply of Goods will be earlier of following:
a. Date of Actual Issue of Invoice
b. Last Date of Issuance of Invoice as required under Section-31.
c. Date of Receipt of Payment*
*Note: w.e.f. 15 November, 2017 Condition of Date of Receipt of Payment has been kept in abeyance in case of Supply of Goods for all Registered Persons except for Composition Dealers. (N.No. 66/2017 dated 15.11.2017).
Accordingly, now for all Registered Persons except for Composition Dealers, condition for payment of GST in case of Advance from customers in respect of Goods has been kept in abeyance.
Therefore, Time of Supply is earlier of actual date of Invoice or Last Date prescribed for issuance of Invoice under Section 31.
Last Date for issuance of Invoice as per Section-31 in respect of Goods
Normal Case
(1) A registered person supplying taxable goods shall, before or at the time of,-
(a) removal of goods for supply to the recipient, where the supply involves movement of goods; or
(b) delivery of goods or making available thereof to the recipient, in any other case,
issue a tax invoice showing the description, quantity and value of goods, the tax charged thereon and such other particulars as may be prescribed :
When Continuous Supply of Goods are involved like (through Pipelines etc.)
(4) 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, as the case may be, each such payment is received.
In Case of Goods Sent on Approval or Return Basis (Section 31(7))
In case, where the goods being sent or taken on approval for sale or return are removed from Premise, the invoice shall be issued before or at the time of supply (i.e. final supply) or six months from the date of removal, whichever is earlier.
Summary of Provisions with the help of Illustrations
Case | Actual Date of Invoice | Last Date of Issuance of Invoice as per Section 31 | Time of Supply |
Normal Case | 10 October 2023 | 15 October 2023 (i.e. date of removal of goods from Premise) | 10 October 2023 |
Continuous Supply of Goods | 10 October 2023 | 5 October 2023 (i.e. date when successive statement was provided) | 5 October, 2023 |
Goods Sent for Approval/Return | 10 October 2023 | 30 September (six months from date of removal from factory) | 30 September, 2023 |
2. Time of Supply of Goods under Reverse Charge (Section 12(3)
RCM in case of Goods is applicable in respect of Notified Goods vide N.No. 4/2017 as amended like Cashew Nuts, Silk yarn etc.
Time of supply in this case shall be the earliest of the following dates:
(a) the date of the receipt of goods; or
(b) the 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; or
(c) the date immediately following thirty days from the date of issue of invoice or any other document, by whatever name called, in lieu thereof by the supplier:
Provided that where it is not possible to determine the time of supply under clause (a) or clause (b) or clause (c), the time of supply shall be the date of entry in the books of account of the recipient of supply.
Time of Supply in case of Debit Notes
As per Section-34, Debit Notes can be issued if it has been found that in original invoice at the time of actual supply, Tax has been short paid either due to under-valuation or otherwise, Taxpayer will be required to issue Debit Notes to pay the differential tax amount.
Now, question comes what will be the time of Supply of such Debit Notes i.e. Though differential tax would be paid at the time of issuance of Debit Notes, whether interest will be payable or not on this differential tax from the date of actual invoice.
In this regard, in our opinion, Debit Note is just a mechanism designed by the Law to allow the Taxpayers to pay differential tax, but it does not waive the responsibility of the Taxpayers to discharge the correct tax at the time of actual invoice/supply itself otherwise it may become a tool to delay the payment of tax.
Therefore, interest will be payable even if in the cases where Debit Notes are issued due to genuine reasons like Price-Variation which are known only after lapse of some period of time.
Further, one point is also to be noted in support of our opinion is that it is like short payment of Tax against original supply which has already happened, therefore taxpayer can not escape from interest liability.
Time of Supply in case of interest received on Delayed Payment from Customers
First question that arise is whether GST is payable on interest/penalty received from Customers for delay in payment of Invoice. So the answer is Yes because Section 15 prescribes that:
"interest or late fee or penalty for delayed payment of any consideration for any supply" will form part of Value of Supply.
Now second, question comes to mind how GST will be discharged on such interest as actual invoice has already been issued. So answer of this question lies in Debit Notes to be issued in terms of Section-34 to pay the differential GST.
Now third question rise whether interest is payable on such Debit Notes as we opined in earlier section. So answer to this question is "No" as special exception has been created in Section 12 (6) which prescribes that:
"The time of supply to the extent it relates to an addition in the value of supply by way of interest, late fee or penalty for delayed payment of any consideration shall be the date on which the supplier receives such addition in value."
This exception also strengthen our opinion that in normal cases, interest is payable in case of issuance of Debit Notes.
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Disclaimer: We have taken due care to the best of our knowledge while explaining the provisions surrounding the issue purely for informational/academic purpose. It should not be considered as professional advice or consultancy to be relied upon. While due care has been taken by Fab Gyan in preparing this article, certain mistakes and omissions may creep in. The Fab Gyan or its Author does not accept any liability for any loss or damage of any kind arising out of any inaccurate or incomplete information in this document nor for any actions taken in reliance thereon.