Time of Supply in GST

Pramit Pratim Ghosh |Updated on: May 13, 2022

• What is the Time of Supply of Services under GST?
• Time of Taxation in Previous Regime
• Time of Supply in GST
• Time of Supply of Goods & Services under Forward Charge
• Time of Supply of Goods & Services under Reverse Charge

What is the Time of Supply of Services under GST?

For any taxation system, time of taxation or point of taxation is of crucial importance. Point of taxation (POT) refers to the point in time when tax is required to be paid for a taxable event. This is a mechanism which is used to determine the point in time when the tax liability will arise.

One of the major changes which has occurred between the previous indirect taxation regime and currently in GST is, the definition of taxable event. While earlier, the taxable event was sale / removal, currently it is supply. Accordingly we need to revisit the time of taxation, and understand how the time of taxation under GST pans out.

Time of taxation in previous regime

Under the previous indirect tax regime, the point of taxation was different for each type of tax:

• Manufacturing of goods (Central Excise): Removal of the excisable goods from the excise unit
• Rendering of services (Service tax): Earliest of date of receipt of payment or date of issue of invoice
• Sale of goods (VAT / CST): Actual sales of goods

Time of supply in GST

The time of taxation in GST is referred to as time of supply. Under GST, the taxable event is supply of goods and services. The time - point of taxation of GST, when goods or services are supplied will be determined in terms of the ‘time of supply’ provisions, laid down by the GST Council.

The time of supply provisions, which determine the point of taxation of goods and services, can be split into 2 parts:

• For goods & services on forward Charge
• For goods & services on reverse Charge

Time of supply of goods & services under forward charge

Forward charge is a mechanism in which the supplier has to levy tax and remit the same to the credit of the central or state Government. Under the current tax regime, tax is levied and collected on most transactions using the forward charge mechanism (also called Direct Charge).

Time of supply of goods under forward Charge

The liability of GST (CGST and SGST/UTGST or IGST, as applicable) will arise at the earliest of the following:

• Date of invoice: The date on which the supplier issues the invoice
• Due Date to issue invoice: The last date on which the supplier is required to issue the invoice with respect to the supply of goods. In case of supply of goods involving the movement goods, the invoice needs to be issued at the time of removal. In other cases, at the time of delivery of goods to the recipient.
• Receipt of payment: The date on which payment is received. The point of taxation in this case will be the earliest of the date on which payment is accounted in the books of accounts of the recipient or the date on which payment is credited to his bank account.

Time of supply of services under forward charge

The liability of GST (CGST and SGST/UTGST or IGST, as applicable) will arise at the earliest of the following

• Date of invoice: The date on which the supplier issues the invoice
• Due date to issue invoice: The last date on which the supplier is required to issue the invoice is 30 days from the date of supply of services. In case of a banking company, the invoice has to be issued within 45 days from the date of supply of services.
• Receipt of payment: The date on which payment is received. The earliest of the date on which the payment is accounted in the books of accounts or the date on which the payment is credited to his bank account.

Note: In case invoice is not available, the time of supply will be the earliest of the last day to issue invoice and receipt of payment. The last date to issue the invoice will be 30 days from the date of supply of services

Time of supply of goods & services under reverse charge

Under the reverse charge mechanism, the recipient or buyer of goods or services has to pay tax to the credit of the government unlike forwarding charge, where the supplier has to pay the tax. This mechanism has primarily been introduced to ensure that the tax is collected on the sale of goods or services from various unorganised sectors. This has helped the government to track and tax those taxable goods and services which were so far not traceable.

In the previous regime, the relevant taxes were applicable on goods and services under Reverse Charge. On purchases of goods made from unregistered dealers, the recipient (registered dealer) of goods had to pay purchase tax on a reverse charge basis. Similarly, on certain notified categories of services, the recipient had to pay service tax on a reverse charge basis. The burden of tax liability under reverse charge, was applicable completely on the recipient of service or partially on the service provider and the recipient of service, depending on the nature of the service.

Time of supply of goods under reverse Charge

The liability of GST (CGST and SGST/UTGST or IGST as applicable) will arise at the earliest of the following:

• Date of receipt of goods: The date on which the goods are received by the recipient
• Date of payment: The date on which payment is made. The earliest of the date on which the payment is accounted for in the books of accounts of the recipient or the date on which the payment is credited to his bank account
• 30 days from date of invoice: The date immediately following 30 days from the date of issue of invoice by the supplier

Note: If for any reason, the above dates cannot be determined, then the time of supply will be the date of recording the supply in the books of the recipient.

Time of supply of services under reverse Charge

The liability of GST (CGST and SGST/UTGST or IGST as applicable) will arise at the earliest of the following

• Date of payment:Earliest of date of payment entered in books of accounts or the date on which payment is credited to the bank accounts
• 60 days from the date of invoice: In case payment is not made by recipient to service provider within 60 days, the time of supply will the date immediately following the expiry of 60 days

Note: If for any reason, the above dates cannot be determined, then the time of supply will be the date of recording the supply in the books of the recipient.