Time of supply determines when a taxpayer must report a transaction, pay GST and issue an invoice. For goods, Section 12 of the CGST Act lays down specific rules. Getting the time of supply wrong can lead to interest, late fees and incorrect return filing.
General Rule Under Section 12(1)
For supplies of goods where tax is payable under forward charge, the time of supply is the earliest of the following dates:
- Date of issue of invoice by the supplier, or the last date on which the supplier is required to issue an invoice under Section 31.
- Date on which the supplier receives payment.
If the supplier does not issue an invoice, the time of supply is the date of provision of goods or the date of receipt of payment, whichever is earlier.
Invoice Due Date for Goods
Under Section 31(1)(a), a tax invoice for supply of goods must be issued before or at the time of removal of goods for supply to the recipient, where the supply involves movement of goods. If the goods are not moved, the invoice must be issued at the time of delivery or making available to the recipient.
Therefore, the invoice due date is generally the date of removal or delivery. If an invoice is issued late, the time of supply may be the last date when it should have been issued.
Payment Date
Payment date is the date on which payment is entered in the books of account of the supplier or the date on which the payment is credited to the supplier's bank account, whichever is earlier. This includes advances received.
Practical Examples
Example 1: Goods Moved, Invoice on Time
- Date of removal: 10 June
- Invoice issued: 10 June
- Payment received: 15 July
Time of supply = 10 June (invoice date).
Example 2: Advance Received Before Delivery
- Advance received: 20 May
- Goods removed: 5 June
- Invoice issued: 5 June
Time of supply = 20 May (payment date), because payment was received earlier than invoice.
Thus, GST is payable on the advance in the return for May.
Example 3: Invoice Issued Late
- Goods removed: 8 August
- Invoice issued: 20 August (late, due on 8 August)
- Payment received: 15 August
The invoice was due on 8 August. The last date of invoice is 8 August. Payment received on 15 August. Time of supply = 8 August, the last date on which invoice was required to be issued.
Example 4: No Movement of Goods
- Goods delivered to buyer at seller's premises: 1 July
- Invoice issued: 3 July
- Payment received: 10 July
Time of supply = 1 July (date of making available, which is also the invoice due date).
Exceptions
Continuous Supply of Goods
For continuous supply of goods where successive statements of accounts or successive payments are involved, the time of supply is the date of expiry of the period to which the statement or payment relates, or the date of receipt of payment, whichever is earlier. This applies to long-term supply agreements like supply of electricity, gas, etc.
Goods on Approval
For goods sent on approval or on sale or return basis, the time of supply is the earlier of:
- The time when it becomes known that the supply has taken place (i.e., approval or expiry of approval period).
- Six months from the date of removal.
If the goods are not returned within six months, the supply is deemed to have taken place.
Reverse Charge
For reverse charge on goods, the time of supply is the earliest of:
- Date of receipt of goods.
- Date of payment.
- Date immediately following 30 days from the date of issue of invoice by the supplier.
- Date of entry in the recipient's books of account.
Importance of Time of Supply
- Determines the tax period in which liability must be reported in GSTR-1 and GSTR-3B.
- Affects interest calculation for late payment.
- Affects input tax credit availability for the recipient.
How Anuj Desai & Associates Can Help
We help businesses determine correct time of supply for goods, manage advance receipts, invoice due dates and return reporting to avoid interest and penalties.
Contact Anuj Desai & Associates
Email: office@anujdesaiassociates.com
Phone: 9619456656
Website: https://anujdesaiassociates.com
LinkedIn: linkedin.com/in/ca-anuj-desai-122547230