Section 14 of the CGST Act (overruling normal provisions of Time of Supply), defines the Time of Supply in case there is change in Rate of GST. Here determination of Time of Supply is important as it will be deciding factor for applicable Rate of Tax.
In this article, we will discuss the provisions of Section 14 with the help of illustrations/chart.
A. In case, Goods/Services have already been supplied before change of Rate of Tax
a. Where Invoice and Payment has been received after change of Rate of Tax, Time of Supply shall be issuance of Invoice or Receipt of Payment which ever is earlier. Accordingly, in this case, Rate of Tax applicable will be changed one.
b. Where the invoice has been issued prior to the change in rate of tax but payment is received after the change in rate of tax,the time of supply shall be the date of issue of invoice; Accordingly, in this case, Pre-Changed Rate will be applicable.
c. Where the payment has been received before the change in rate of tax, but the invoice for the same is issued after the change in rate of tax, the time of supply shall be the date of receipt of payment. Accordingly, in this case, Pre-Changed Rate will be applicable.
Summary: In case, Goods/Service has been supplied before change of Tax, Pre-changed rate will be applicable in all scenarios except where both Invoice and Payment has been received after change of Rate.
B. In case, Goods/Services have been supplied after change of Rate of Tax
a. Where the payment is received after the change in rate of tax but the invoice has been issued prior to the change in rate of tax, the time of supply shall be the date of receipt of payment. Accordingly, in this case, Rate of Tax applicable will be changed one.
b. Where the invoice has been issued and payment is received before the change in rate of tax, the time of supply shall be the date of receipt of payment or date of issue of invoice, whichever is earlier. Accordingly, in this case, Pre-Changed Rate will be applicable.
c. Where the invoice has been issued after the change in rate of tax but the payment is received before the change in rate of tax, the time of supply shall be the date of issue of invoice. Accordingly, in this case, Rate of Tax applicable will be changed one.
Summary: In case, Goods/Service has been supplied after change of Tax, Changed rate will be applicable in all scenarios except where both Invoice and Payment has been received before change of Rate.
Explanation .-For the purposes of this section, "the date of receipt of payment" shall 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.
Provided that 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 four working days from the date of change in the rate of tax.
Illustrations
There is change of GST Rate on Molasses from 28% to 5% w.e.f. 20 October, 2023.
Accordingly, following scenarios (the same will be applicable to Service also) are discussed:
Date of Supply | Date of Invoice | Date of Receipt of Payment | Time of Supply | Rate Applicable |
19 October | 19 October | 18 October | 19 October* | 28% |
19 October | 21 October | 19 October | 19 October | 28% |
19 October | 21 October | 22 October | 21 October | 5% |
19 October | 19 October | 22 October | 19 October | 28% |
21 October | 18 October | 21 October | 21 October | 5% |
21 October | 22 October | 18 October | 22 October | 5% |
21 October | 19 October | 18 October | 18 October | 28% |
21 October | 21 October | 22 October | 21 October | 5% |
* If it would have been the case of Service, Time of Supply will be 18 October as this scenario is not covered under Section-14 because all three events (date of supply, Invoice, receipt of payment) has already happened before change of Rate of Tax. Therefore, as per normal provisions (Section-13) of Time of Supply, date of receipt of payment will be time of supply in case of service if it is prior to date of issuance of invoice. (Rate will be 28%).
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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.