Point of taxation and time of supply

Point of taxation under GST is at the time of supply of goods or services or both. Liability to pay tax arises at the time of supply of goods or services or both.

It is very important to understand concept of time of supply to compute the liability of output tax.

What is time of supply in GST?

Time of supply is the time at which goods or services are considered to be supplied. Under GST the tax is on supply of goods or services or both.

Time of supply is the main factor to decide tax liability. Liability to pay tax arises as soon as a supply is made.

Tax liability arises at the time of supply.

Time of supply of Goods and tax liability

Tax liability on any supply of goods arises at the time of supply. Time of supply in case of goods should be determined as explained below.

Time of supply of goods should be earliest of:

1. Date of issue of invoice or date on which supplier is required to issue tax invoice
2. The data on which payment is received against the supply

Tax should be charged on invoice amount whether supply is actually made or not or partially made.

Date of receipt of payment will be the date on which receipt is accounted in books of accounts or date on which money is credited into bank account.

When you are liable to pay tax under reverse charge basis, the time of supply should be earliest of:

1. The date of the receipt of goods; or
2. The 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, whichever is earlier; or
3. The date immediately following 30 days from the date of issue of invoice or any other document, by whatever name called, in lieu thereof by the supplier.

Provided that where it is not possible to determine the time of supply under clause (a) or clause (b) or clause (c), the time of supply shall be the date of entry in the books of account of the recipient of supply.

Time of supply of services and tax liability

In case of supply of services, the time of supply will be earliest of:

• The date of issue of invoice by the supplier, if the invoice is issued within the period prescribed under sub-section (2) of section 31 or the date of receipt of payment, whichever is earlier; or
• The date of provision of service, if the invoice is not issued within the period prescribed under sub-section (2) of section 31 or the date of receipt of payment, whichever is earlier; or
• The date on which the recipient shows the receipt of services in his books of account, in a case where the provisions of clause (a) or clause (b) do not apply:

Provided that where the supplier of taxable service receives an amount up to one thousand rupees in excess of the amount indicated in the tax invoice, the time of supply to the extent of such excess amount shall, at the option of the said supplier, be the date of issue of invoice relating to such excess amount.