TIME AND VALUSE OF SUPPLY UNDER MODEL GST LAW

[Mr. M. GOVINDARAJAN]

Time of supply

The time of supply fixes the point when the liability to charge GST arises.  Section 12 of the Act deals with the time of supply of goods and Section 13 of the Act  deals with the time of supply of services.

Time of supply of goods

Section 12(2) provides that the time of supply of goods shall be the earliest of the following-

(a) (i) the date on which the goods are removed by the supplier for supply to the recipient, in a case where the goods are required to be removed; or

(ii) the date on which the goods are made available to the recipient, in a caswe where the goods are not required to be removed; or

Explanation 1 to this Section provides that the provisions contained in (ii) shall apply in cases where the  goods-

• are physically not capable of being moved; or
• are supplied in assembled or installed form; or
• are supplied by the supplier to his agent or his principal.

(b) the date on which the supplier issues the invoice with respect to the supply; or

(c) the date on whichthe supplier receives the payment with respect to the supply; or

(d) the date on which the recipient shows the receipt of the goods in his books of accounts.

Explanation 2 to this Section provides that the supply shall be deemed to have been made to the extent it is covered by the invoice or the payment.

Explanation 3 to this Section provides that 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, whoever is earlier.

Continuous supply of goods

Section 12(3) provides that in case of continuous supply of goods successive statements of accounts or successive payments are involved.  The time of supply in such case shall be the date of expiry of the period to which such successive statements of accounts of successive payment relates.  If there is no such successive statements of account, then the time of supply shall be-

• the date of issue of invoice; or
• the date of receipt of payment

whichever is earlier.

Section 12(4) gives powers to the Central Government or a Statement to specify, by notification, on the recommendation of the Council, the supply of goods that shall be treated as continuous supply of goods.

Time of supply on reverse charge basis

Section 12(5) provides that in case of supplies in respect of which tax is paid or liable to be paid on reverse charge basis, the time of supply shall be the earliest of the following-

• the date of receipt of goods; or
• the date on which the payment is made;
• the date of receipt of invoice; or
• the date of debit in the books of accounts.

The explanation to this section provides that that ‘the date on which the payment is made’ shall be-

• the date on which the payment is entered in the books of accounts of the recipient; or
• the date on which the payment is debited in his bank account,

 whichever is earlier.

Time of supply goods sent on approval basis

Section 12 (6) provides that if the goods, being sent or taken on approval or sale or return or similar terms, are removed before it is known whether a supply will take place, the time of supply shall be at the time when-

• it becomes known that the supply has taken place; or
• six months from the date of removal,

whichever is earlier.

Non possibility to determine the time of supply

Section 12 (7) provides that in case it is not possible to determine the time of supply under any of the provisions as discussed above, the time of supply shall-

• in case where a periodical return has to be filed, the date on which such return is to be filed; or
• in any other case, the date on which the CGST/SGST is paid.

Time of Supply of service

Section 13(2) provides that time of supply of services shall be-

(a) the date of issue of invoice or the date of receipt of the payment, whichever is earlier, if the invoice is issued within the prescribed period; or

(b) the date of completion of the provision of service or the date of receipt of payment, whichever is earlier, if the invoice is not issued within the prescribed period; or

(c) the date on which the recipient shows the receipt of services in his books of account in a case where the provisions of above two clauses do not apply.

Explanation 1 to this section provides that the supply shall be deemed to have been made to the extent it is covered by the invoice or payment.

Explanation 2 to this section provides that ‘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.

Continuous supply of services

Section 13(3) provides that in case of continued supply of services, the time of supply shall be-

• Where the due date of payment is ascertainable from the contract, the date on which the payment is liable to be made by the recipient of service, whether or not any invoice has been issued or any payment has been received by the supplier of the service;
• Where the due date of payment is not ascertainable from the contract, each such time when the supplier of service receives the payment, or issues an invoice, whichever is earlier;
• Where the payment is linked to the completion of an event, the time of completion of that event.

Section 13(4) provides that the Central Government or a State Government may, on the recommendation of the Council, specify, by notification, the supply of services that shall be treated as continuous of supply of services.

Reverse charge

Section 13 (5) provides that in case of supplies in respect of which tax is paid or liable to be paid on reverse charge basis, the time of supply shall be the earliest of the following dates-

• the date of receipt of services; or
• the date on which the payment is made; or
• the date of receipt of invoice; or
• the date of debit in the books of accounts.

Explanation to this section provides that ‘the date on which the payment is made’ shall be-

• the date on which the payment is 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.

Cessation of service

Section 13(6) provides that in a case where supply of services ceases under a contract before the completion of supply, such services shall be deemed to have been provided at the time when the supply ceases.

Non possibility to determine the time of supply

Section 13(7) provides that where it is not possible to determine the time of supply of services as mentioned above, the time of supply shall-

• in a case where a periodical return has to be filed, be the date on which such return is to be filed; or
• in any other case, be the date on which CGST/SGST is paid.

Change in rate of tax in respect of supply of services

It is inevitable in case of services, change of tax rate at any time.  The Government may vide Finance Act increase the rate of tax.  For example, service tax rate has been fixed initially @ 5% and later on changed to 8%, 10%, 12% and 14%.    In respect of continuous service, take example of telecommunication service, if the change in rate is effected in any period, care is to be taken to cover the new rate of tax on the date which it comes into effect.  The change in rate of tax involves two kinds of situations-

• in case the taxable service has been provided before the change in effective rate of tax; and
• in case the taxable service has been provided after the change in effective rate of tax.

The time of supply, in case the taxable service has been provided before the change in effective rate of tax, shall be determined in the following manner-

• where the invoice for the same has been issued and the payment is also received after the change in effective rate of tax, the time of supply shall be the date of receipt of payment or the date of issue of invoice, whichever is earlier; or
• where the invoice has been issued prior to change in effective rate of tax but the payment is received after the change in effective rate of tax, the time of supply shall be the date of issue of invoice; or
• where the payment is received before the change in effective rate of tad, but the invoice for the same has been issued after the change in effective rate of tax, the time of supply shall be the date of receipt of payment.

The time of supply, in case that taxable service has been provided after the change in effective rate of tax, shall be determined in the following manner-

• where the payment is received after the change in effective rate of tax but the invoice has been issued prior to the change in effective rate of tax, the time of supply shall be the date of receipt of the payment; or
• where the invoice has been issued and the payment is received before the change in effective rate of tax, the time of supply shall be the date of receipt of payment or date of issue of invoice, whichever is earlier; and
• where the invoice has been issued after the change in effective rate of tax but the payment is received before the change in effective rate of tax, the time of supply shall be the date of issue of invoice.

The explanation to this section provides that ‘the date of receipt of payment’ shall be the date on which the payment is entered in the books of accounts of the supplier or the date on which the payment is credited to his bank account, whichever is earlier.  The date of receipt of payment shall be the date of credit in the bank account when such credit in the bank account is after four working days from the date of change in the effective rate of tax.

Value of taxable supply

Section 15 deals with the value of taxable supply.  Section 15(1) provides that the value of a supply of goods and/or services shall be the transaction value, that is the price actually paid or payable for the said supply of goods and/or services where the supplier and the recipient of supply are not related and the price is the sole consideration of the supply.

Inclusion in transaction value

Section 15(2) provides that the transaction value shall include-

• any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods and/or services;

• the value, apportioned as appropriate, of such goods and/or services as are supplied directly or indirectly by the recipient of the supply free of charge or at reduced cost for use in connection with the supply of goods and/or services being valued, to the extent that such value has not been included in the price actually paid or payable;
• any taxes, duties, fees and charges levied under any statute other than SGST Act or CGSG Act or the IGST Act;
• incidental expenses, such as, commission and packing, charged by the supplier to the recipient of a supply, including any amount charged for anything done by the supplier in respect of the supply of goods and/or services at the time of, or before the delivery of the goods, as the case may be, supply of the services;
• subsidies provided in any form of manner, linked to the supply;
• any reimbursable expenditure or cost incurred by or on behalf of the supplier and changed in relation to the supply of goods and/or services;
• any discount or incentive that may be allowed after the supply has been effected.

Non inclusion in transaction value

The proviso to Section 13(2) provides that such post supply discount which is established as per the agreement and is known at or before the time of supply and specifically linked to relevant invoices shall not be included in the transaction value.

Section 13(3) provides that the transaction value shall not include any discount allowed before or at the time of supply provided such discount is allowed in the course of normal trade practice and has been duly recorded in the invoice issued in respect of the supply.

Determination of valuation that cannot be made

Section 13(4) provides that the value of supply of goods and/or services in the following situations which cannot be valued, shall be determined in such manner as may be prescribed in the rules-

• the consideration, whether paid or payable, is not money, wholly or partly;
• the supplier and the recipient of the supply are related;
• there is reason to doubt the truth or accuracy of the transaction value declared by the supplier;
• business transactions undertaken by a pure agent, money changer, insurer, air travel agent and distributor or selling agent of lottery;
• such other supplies as may be notified by the Central or a State Government in this behalf on the recommendation of the Council.