Time of Supply

For goods supplied on a 'sale on approval or return' basis, the time of supply is determined by the proviso to Section 12(1) of the CGST Act, 2017. The time of supply in such cases is the earliest of: (a) the date on which it is known that the supply has taken place (i.e., when the recipient accepts the goods); or (b) six months from the date of removal of the goods. This specific rule ensures that tax liability does not remain open indefinitely. The impact on the recipient's ITC claim is significant. The recipient can claim ITC only when they actually receive the goods and possess a valid tax invoice. If the goods are returned, no supply has occurred, and thus no ITC is available. If the goods are accepted, the time of supply is triggered, and the supplier is required to issue a tax invoice. If acceptance occurs much later, or after six months from removal, the supplier must issue an invoice by the end of the six-month period, even if the goods haven't been formally accepted. The recipient can then claim ITC based on this invoice, subject to the time limits under Section 16(4). Delays in acceptance or invoicing beyond the six-month period can create complexities in ITC reconciliation and compliance.

The time of supply for vouchers is governed by Section 12(4) for goods and Section 13(4) for services of the CGST Act, 2017. The determination depends on whether the supply for which the voucher is issued is identifiable at the time of issue of the voucher. If the supply is identifiable at the time of issue (e.g., a voucher for a specific spa service), the time of supply is the date of issue of the voucher. If the supply is not identifiable at the time of issue (e.g., a multi-brand gift voucher that can be redeemed for various goods/services), the time of supply is the date of redemption of the voucher. This distinction is critical for ITC. If the time of supply is the date of issue, the recipient can potentially claim ITC earlier, provided all other conditions for ITC are met and a tax invoice is issued. However, if the time of supply is the date of redemption, ITC can only be claimed upon redemption, when the actual supply occurs and the tax liability crystallizes. This can create a deferral in ITC availability for generic vouchers.

It is the earlier of: (a) 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, or (b) The date immediately following 60 days from the date of issue of invoice by the supplier.

Under the reverse charge mechanism, the recipient of services is liable to pay GST. The time of supply for services under R RCM is the earliest of: (a) the date of payment as entered in the books of account of the recipient or the date on which the payment is debited from the recipient's bank account, whichever is earlier; or (b) the date immediately following sixty days from the date of issue of invoice or any other document, by whatever name called, by the supplier. For goods, it is the earliest of: (a) the date of receipt of goods, (b) the date of payment, or (c) the date immediately following thirty days from the date of issue of invoice by the supplier. The recipient can avail ITC on such services only after paying the GST liability under RCM. The ITC can be claimed in the same tax period in which the payment is made and the tax is paid to the government, subject to other conditions for availing ITC under Section 16 of the CGST Act, 2017.

For continuous supply of services, Section 13(5) of the CGST Act, 2017, specifies the time of supply. If the due date of payment is ascertainable from the contract, the time of supply is the date on which the payment is liable to be made. If the due date of payment is not ascertainable, the time of supply is the date when the supplier receives the payment. Where the payment is linked to the completion of an event, the time of supply is the date of completion of that event. If the invoice is not issued regularly or within the prescribed time (Rule 47 of CGST Rules, 2017), the time of supply for continuous supply of services is the date of issue of invoice or the date of receipt of payment, whichever is earlier. This impacts the recipient's ability to claim ITC because ITC can only be claimed upon receipt of a valid tax invoice and the actual receipt of services. If the supplier delays issuing invoices, even if the time of supply has occurred based on payment or event completion, the recipient cannot claim ITC until the invoice is received. This can lead to a mismatch in the period of tax payment by the supplier and ITC claim by the recipient, potentially affecting working capital.

An Input Service Distributor (ISD) is an office of the supplier of goods or services or both which receives tax invoices towards the receipt of input services, including services liable to tax under reverse charge, for or on behalf of distinct persons and is liable to distribute the input tax credit in respect of such invoices in the manner provided in Section 20 of the CGST Act, 2017. The time of supply for the underlying input services received by the ISD is determined as per Section 13 of the CGST Act, 2017. However, the ISD's role is primarily to distribute the ITC based on the tax invoice received from the original supplier of input services. The ISD must issue an ISD invoice or an ISD credit note for distributing the ITC. The recipient units can avail the distributed ITC only upon receipt of a valid ISD invoice from the ISD. While the time of supply for the original input service determines when the original supplier needs to pay tax, it does not directly affect the timing of ITC distribution by the ISD or its availment by recipient units, which is contingent upon the ISD issuing its own distribution document within the prescribed timelines as per Rule 39 of the CGST Rules, 2017. The ITC available for distribution in a month shall be distributed in the same month and details furnished in FORM GSTR-6.

If the supply is identifiable at the point of issue of the voucher, the time of supply is the date of issue of the voucher. If the supply is not identifiable at that point, the time of supply is the date of redemption of the voucher.

In the case of continuous supply of services, the time of supply is the earliest of: (a) the date of issue of invoice by the supplier, or (b) the date of receipt of payment, or (c) the date when the supplier is required to issue the invoice as per Section 31 of the CGST Act, 2017. The recipient can avail ITC only upon receipt of a valid tax invoice and payment of tax by the supplier to the government. If there is a delay in the issuance of the invoice by the supplier beyond the prescribed time (e.g., within 30 days from the date of supply of service or completion of event), the time of supply is still triggered by the event that should have led to the invoice. However, the recipient cannot claim ITC until they actually receive the tax invoice and the details are communicated in GSTR-2B. This can lead to a deferral of ITC claim for the recipient, impacting their working capital, even if the time of supply has technically occurred for the supplier.

For services, GST is leviable on advances received, and the time of supply is the date of receipt of payment or issue of invoice, whichever is earlier. The recipient may avail ITC on such advance payment if they have received a valid tax invoice and the tax has been paid by the supplier to the government. If the supply is subsequently cancelled or the nature of supply changes, the supplier is required to issue a credit note to the recipient as per Section 34 of the CGST Act, 2017. Upon issuance of the credit note, the supplier can adjust their output tax liability. Correspondingly, the recipient who had availed ITC on the original advance payment must reverse the ITC to the extent of the credit note issued, as per Section 16(2)(c) read with Section 34(2) of the CGST Act, 2017. The reversal should be done in the tax period in which the credit note is issued.

It is the earlier of: (a) Date of issue of invoice by the supplier or the last date on which he is required to issue the invoice with respect to the supply, or (b) Date on which the supplier receives the payment. Note: An exemption notification means GST is payable only on the issuance of the invoice, not on receipt of advance.

Section 16(4) of the CGST Act, 2017, imposes a time limit for claiming Input Tax Credit (ITC), stating that ITC on an invoice or debit note cannot be claimed after the due date for furnishing the return under Section 39 for the month of September following the end of the financial year to which such invoice or debit note pertains, or furnishing of the relevant annual return, whichever is earlier. For services, the time of supply is generally the date of issue of invoice or receipt of payment, whichever is earlier (Section 13(2)). In cases of advance payments for services, the time of supply arises at the time of receipt of payment, even if the invoice is issued later. The tax liability arises at this earlier point. However, the eligibility to claim ITC is linked to the receipt of goods or services and possession of a tax invoice. If an advance payment is made and tax is paid, but the invoice is issued much later (e.g., in the next financial year), the recipient might face challenges in claiming ITC within the Section 16(4) deadline, as the invoice date is often the primary reference for the financial year pertaining to the ITC claim. This necessitates careful reconciliation and timely issuance of invoices by suppliers, especially for services involving advances.

For supplies between associated enterprises or distinct persons, even if made without consideration, they are considered a 'supply' under Schedule I of the CGST Act, 2017. The time of supply for such transactions is determined by Section 13(2) for services and Section 12(2) for goods. However, a specific proviso to Section 13(2) states that in cases where the supplier and recipient are related persons or distinct persons, and the supply is made without consideration, the time of supply for services shall be the date on which the recipient of service shows the receipt of services in his books of account. For goods, the time of supply is generally the date of issue of invoice or the last date on which the invoice ought to have been issued. The valuation of such supplies is governed by Rule 28 of the CGST Rules, 2017, which allows for various methods, including the open market value or 90% of the price charged to unrelated customers. The primary consideration for claiming ITC in such inter-company transactions is the existence of a valid tax invoice and the actual receipt of goods or services. The unique time of supply rules for related/distinct persons ensure that tax is accounted for even in the absence of immediate consideration, thus allowing the recipient to claim ITC based on the deemed time of supply and the corresponding tax payment.

When there is a change in the rate of tax, Section 14 of the CGST Act, 2017, specifically governs the determination of the time of supply. This section is crucial for determining the applicable tax rate and, by extension, the Input Tax Credit (ITC) implications. The time of supply is determined based on three factors: the date of supply of services, the date of issue of invoice, and the date of receipt of payment. If two of these three events occur before the change in tax rate, the time of supply is considered to be before the change. Conversely, if two of these three events occur after the change in tax rate, the time of supply is considered to be after the change. If only one event occurs before or after the change, the time of supply is determined based on specific rules for goods and services. For instance, if the goods are supplied before the change in rate but the invoice is issued and payment is received after, the old rate applies. This determination directly impacts the ITC available to the recipient, as ITC can only be claimed on the tax actually paid and reflected in a valid tax invoice at the applicable rate. Any discrepancy or delay in invoicing or payment around the rate change can lead to complexities in claiming the correct ITC.

For services under the Reverse Charge Mechanism (RCM), the time of supply is determined by Section 13(3) of the CGST Act, 2017, which deviates significantly from the forward charge mechanism. The time of supply for RCM services is the earliest of the following dates: (a) the date of payment as entered in the books of account of the recipient or the date on which the payment is debited from his bank account, whichever is earlier; or (b) the date immediately following sixty days from the date of issue of invoice or any other document by the supplier. If it is not possible to determine the time of supply under (a) or (b), the time of supply is the date of entry in the books of account of the recipient. This impacts ITC significantly because the recipient is liable to pay tax under RCM and can claim ITC only after the tax has been paid. The determination of the time of supply under RCM dictates when the tax liability arises for the recipient, thereby affecting the period in which they can claim the corresponding ITC, subject to other conditions like possession of a valid tax paying document and filing of return.

As per Schedule I of the CGST Act, supply of goods or services between related persons, when made in the course or furtherance of business, is considered a supply even if made without consideration. The time of supply for such transactions generally follows the normal rules for goods or services. For goods, it is the date of issue of invoice or date of removal. For services, it is the date of issue of invoice or date of provision of service. The recipient can avail ITC on such deemed supplies, provided they receive a valid tax invoice (or other prescribed document) from the related supplier, and the conditions of Section 16 of the CGST Act are met. Valuation in such cases is governed by Rule 28 of the CGST Rules, 2017, which provides for open market value (OMV), or value of supply of like kind and quality, or value as determined by Rule 30 or 31. A crucial proviso states that where the recipient is eligible for full input tax credit, the value declared in the invoice shall be deemed to be the open market value of the goods or services. Proper documentation, including a tax invoice reflecting the deemed value, is crucial for the recipient to claim ITC.