Time of Supply of Services Under GST: Invoice Date vs Payment Date

For services, the time of supply is generally the earlier of invoice date and payment date, but with specific nuances. Section 13 of the CGST Act governs this. Understanding the rules is critical for correct return filing and interest computation.

General Rule Under Section 13(1) and 13(2)

For forward charge supplies of services, the time of supply is the earliest of:

• Date of issue of invoice by the supplier, if invoice issued within the prescribed period.
• Date of receipt of payment.

If the supplier does not issue an invoice within the prescribed period, the time of supply is the earlier of:

• Date of provision of service.
• Date of receipt of payment.

Invoice Due Date for Services

Under Section 31(2), a tax invoice for services must be issued within 30 days from the date of supply of service. For banking and insurance companies, the period is 45 days from the date of supply.

So, the "date of invoice" in time of supply means the actual invoice date if within the due period; otherwise, the last date of the invoice due period becomes the relevant date.

Payment Date

Payment date is the earlier of:

• Date of entry of payment in the books of account of the supplier.
• Date of credit of payment to the supplier's bank account.

Examples

Example 1: Invoice Issued Within Time, Payment Later

• Service provided: 10 May
• Invoice issued: 20 May
• Payment received: 30 June

Time of supply = 20 May (invoice date).

Example 2: Payment Received Before Invoice

• Advance received: 15 April
• Service provided: 10 May
• Invoice issued: 20 May

Time of supply = 15 April (payment date). GST must be paid on the advance in the April return.

Example 3: Invoice Not Issued Within 30 Days

• Service provided: 1 March
• Invoice issued: 15 April (late, due 31 March)
• Payment received: 20 April

Invoice due date was 31 March. Since invoice was late, the time of supply is the earlier of date of provision of service (1 March) and payment date (20 April), which is 1 March. Therefore, time of supply is 1 March, not the late invoice date. Interest may apply for delay.

Exceptions

Continuous Supply of Services

For continuous supply of services:

• Where payment is linked to periodic completion, time of supply is the date of expiry of the period to which the payment relates, or the date of payment, whichever is earlier.
• Where payment is not linked to periodic completion, time of supply is the date of issue of invoice or date of payment, whichever is earlier.

Reverse Charge

For services under reverse charge, time of supply is the earliest of:

• Date of payment.
• Date immediately following 60 days from date of issue of invoice by supplier.
• Date of entry in books of account of recipient.

If not determinable, the date of entry in books of account.

Change in Rate

Special rules apply when GST rate changes between the date of provision and the time of supply.

Practical Impact

Time of supply determines which month's GSTR-3B includes the liability. Advances are taxable when received, so service providers must track advances and report them in the correct period.

How Anuj Desai & Associates Can Help

We help service providers and recipients determine correct time of supply, manage advances, invoice timelines and return filing to avoid interest and mismatches.

Contact Anuj Desai & Associates
Email: office@anujdesaiassociates.com
Phone: 9619456656
Website: https://anujdesaiassociates.com
LinkedIn: linkedin.com/in/ca-anuj-desai-122547230