Time of Supply of Services- Under Reverse Charge - GST Ready Reckoner - GST

Time of Supply of Services- Under Reverse Charge (RCM) Time of Supply Section 13 of CGST Act 2017 provides the way for the determination of the time of supply in the Supply of service under reverse charge. Before starting analysis about time of supply of services under RCM, we should read section 31 of CGST Act 2017. Time limit for issuance of invoice for supply of services under section 31 of CGST Act 2017 The criteria to determine the time of supply of services depend upon whether the invoice is issued within the time prescribed under section 31. In the case of the taxable supply of services, shall be issued within a period of 30 days from the date of the supply of service: Where the supplier of services is an insurance companies/ banking companies/ financial institutions including NBFCs the period within which the invoice or any document in lieu thereof is to be issued shall be 45 days from the date of the supply of service. [ First proviso rule 47 of CGST Rules ]. In case of insurance companies / banking companies / financial institutions including NBFCs / telecom companies / notified supplier of services making taxable supplies between distinct persons as specified in section 25 , invoice may be issued before or at the time of recording such supply in the books of account or before the expiry of the quarter during which the supply was made [ Second proviso of rule 47 of CGST Rule ] . In case of continuous supply of services , the invoice should be issued either (i) on/ before the due date of payment or [ If due date of payment is known ] (ii) before/ at the time when the supplier of service receives the payment, if the due date of payment is not known or; (iii) on/ before the date of completion of the milestone event when the payment is linked to completion of an event. [Section 31(5) of CGST Act 2017]. Continuous supply of services are provided, or agreed to be provided, continuously or on recurrent basis, under a contract, for a period exceeding 3 months with periodic payment obligations and includes supply of such services as the Government may notify. In case of cessation of supply of services before completion of supply, the invoice (to the extent of the supply made before such cessation) should be issued at the time when the supply ceases [Section 31(6) of CGST Act 2017]. Time of supply of services Subject to reverse charge basis, Section 13(3) of CGST Act 2017 Earliest of the following dates (a) Date of receipt of payment/ advance (whichever is earlier) Credited in the books of accounts, or Debit date in the bank account; or (b) Date immediately following 60 days from the date of issue of invoice or any other legal document in lieu of invoice [ by the supplier, in cases where invoice is required to be issued by the supplier; or (w.e.f. 01.11.2024 vide N.No. 17/2024 dated 27.09.2024) inserted vide Finance (No.2) Act, 2024 ] (c) the date of issue of invoice by the recipient, in cases where invoice is to be issued by the recipient [(w.e.f. 01.11.2024 vide N.No. 17/2024 dated 27.09.2024) inserted vide Finance (No.2) Act, 2024 ] However, if it is not possible to determine the time of supply of services under RCM under clause (a) or clause (b) [ or clause (c) (w.e.f. 01.11.2024 vide N.No. 17/2024 dated 27.09.2024) inserted vide Finance (No.2) Act, 2024 ] of section 13(3) then the time of supply determined as per Second Proviso of Section 13(3) of CGST Act 2017, The date of entry of the transaction in the books of accounts of the recipient of supply. Note: - Exception on services received from associated enterprises located outside India section 9(3) 9(4) of CGST Act 2017 is determined in terms of section 13(3) of CGST Act 2017. In such cases, the time of supply will be the earlier of date of entry in the books of account of the recipient of supply or the date of payment thus, the levy under GST is attracted once such book entries are made even if no actual payment takes place or no invoice is issued. ( Second proviso to section 13(3) of CGST Act, 2017 ). Example Span Industries Ltd., a registered supplier, imports business support services from Green INC, USA on 13 th August (goods order date). Invoice issued for $ 1,20,000/- is raised by Green Inc on 18 th August. Span Industries Ltd. Makes the payment against the said invoice in two different and considered as two different situations I situation - 22 nd September II situation - 27 th December Determine time of supply in each of the aforesaid cases. In this case Services supplied by any person located in non-taxable territory to any person other than non-taxable online recipient, tax is payable under reverse charge any the person located in the taxable territory. [ under section 5(3) of IGST Act 2017, Notification No. 10/2017 IGST Rate Dated: 28 Jun 2017] Since the business support services are provided by green Inc (located in non-taxable territory) to Mint ltd. (person other than non-taxable online and located in taxable territory), tax is payable under reverse charge as per clause (a) and (b) of Section 13(3) of CGSTS Act 2017 by Mint Ltd. Earliest of the following dates Date immediately following 60 th days from the date of issue of invoice or any other legal document in lieu of invoice by the supplier. The date of issue of invoice by the recipient, in cases where invoice is to be issued by the recipient; or Date of receipt of payment/ advance (whichever is earlier ) Credited in the books of accounts, or Debit date in the bank account In other words If make the payment within 60 days from the date of issue invoice, then time of supply of services under RCM will be date of payment. If make the payment after 60 days from the date of issue invoice, then time of supply of services under RCM will be date of issue of invoice. Second Proviso of Section 13(3) of CGST Act 2017, If it is not possible to determine the time of supply any using these parameters, then the time of supply will be the date of entry of the services in the books of account of the recipient of supply. Situation Time of supply Situation I Date of invoice 18 th August Date of payment 22 September Therefore, Time of Supply would be 22 nd of September. In other words , Span Ltd. make the payment within 60 days of the date of issue of invoice, the time of supply is the date of payment i.e., 22 nd September. Situation II 61st days from the date of issue of invoice 18 th October Date of payment 27 th December Therefore, time of supply would be 18 th October In other words, Span Ltd. Make the payment after 60 days from the date of invoice, time of supply is the date immediately following the said period 60 days i.e., 61 st day which is 18 th October. Time of supply of services in case of supply by Associated Enterprises located outside India, [ second proviso of Section 13(3) of CGST Act 2017] Earliest of following dates, The time of supply is the date of entry in the books of account of the recipient or The date of payment Example: - SPAN Ltd. Mumbai holds 51% of share of Mario Inc, a USA based company. Mario Inc provides business auxiliary services to SPAN ltd., determine the time of supply Agreed consideration $ 2,00,000/- Date on which services are provided by Mario Inc. 26 th July Date on which invoice is issued by Mario Inc. 18 th August Date on debit in the books of account of SPAN ltd. 30 th October Date on which payment is made by SPAN ltd. 23 rd December Since SPAN ltd. holds 51% share of Mario Inc, SPAN ltd. And Mario Inc associates enterprises as per section 92A of the provision of income tax act 1961. As per third proviso of section 13(3) of CGST Act 2017, time of supply is the earlier of the following two dates Date of entry in the books of account of the recipient of supply 30 th October Date of payment 23 rd December Thus, time of supply is 30 th October.