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Under GST law the point of taxation in case of services arise at the time of supply of services which is to be determined based on the principles laid down under section 13 of the CGST Act.

1.General rule:

a) Timely issue of invoice: – The law mandates vide section 31(2) of CGST Act read with rule 47 of the CGST Rules to issue invoice within 30 days of the actual supply of services. When invoice is issued within this timeframe the time of supply shall be the earliest of the following

Date of the issue of the invoice     

Date of receipt of payment

Illustration 1

Date of actual supply of service:1 November, 2017.

Date of payment: 18 November, 2017.

Date of invoice:16 November, 2017.

Time of supply: 16 November, 2017.

Suppose Invoice raised on 23 November, 2017. Time of supply will change to 18 November, 2017

b) Delayed issue of invoice: – When invoice is issued beyond the statutorily prescribed period of 30 days the time of supply of services shall be the earlier of the following

  1. Date of actual supply of services
  2. Date of receipt of payment

Illustration 2

Date of actual supply of service: 1 November, 2017.

Date of payment: 18 November, 2017.

Date of invoice: 16 December, 2017.

Time of supply: 1 November, 2017.

Suppose Payment received on 23 October, 2017. Time of supply will change to 23 October, 2017.

c) No invoice cases: – Section 31(2)(c) deals with such cases where no invoice is issued. The date when the recipient shows receipt of services in his books of accounts shall be deemed to be the time of supply of services.

d) Meaning of date of receipt of payment: – The date of receipt of payment is the earlier of the following dates

  1. Date of entry of payment in the suppliers books of account
  2. Date of credit of payment in suppliers bank account

e) Other Relevant Points: –

1.Payment received in excess upto Rupees One Thousand above the amount mentioned in the tax invoice is permitted to be adjusted with the next tax invoice instead of being taxed on receipt basis.

2. Normally the tax arises on the earlier of the date of receipt of payment, date of issue of tax invoice or date of actual provision of service as the case maybe. However, it needs to be noted that if the earlier date covers only partial amount of the transaction value than the time of supply would be bifurcated between the two dates.

Illustration 3

Suppose ABC Limited supplied certain services to XYZ Limited on 10 December, 2017 worth Rs 5 lakhs and raised an invoice on the same date. Now suppose XYZ Limited had paid an advance of Rs 2 lakhs to ABC Limited on 1 October, 2017. Here in this case the time of supply for Rs 2 lakhs will be 1 October, 2017 and tax would be required to be paid within due date for October 2017 else interest will be payable. For the balance Rs 3 lakhs tax would have to paid within due date for December 2017.

3. The notifications 40/2017-Central Tax, dated the 13th October, 2017 and 66/2017 – Central Tax dated 15th November, 2017 cover only advances in respect of goods and remove the requirement to pay the tax on advance payment. The supply of services however continues to be taxable on the earlier of advance or supply basis.

2. Reverse charge cases:

Where the recipient is required to pay tax on reverse charge basis the time of supply shall be the earlier of the following dates

  1. Date of payment as recorded in the books of recipient or date of debit in his bank account whichever is earlier.
  2. Sixty days from the date of issue of invoice or any other document thereof by the supplier.

Where it is not possible to determine date of supply from the above because neither payment has made nor invoice raised by the supplier the time of supply shall be the date of entry in the books of accounts of the recipient.

3.   Supply of vouchers:

a.Statutory definition of voucher: – As per section 2(118) of the CGST Act, “voucher” means an instrument where there is an obligation to accept it as consideration or part consideration for a supply of goods or services or both and where the goods or services or both to be supplied or the identities of their potential suppliers are either indicated on the instrument itself or in related documentation, including the terms and conditions of use of such instrument;

b.Time of supply: – As per section 13(4) of the CGST Act, in case of supply of vouchers by a supplier, the time of supply shall be

  1. the date of issue of voucher, if the supply is identifiable at that point; or
  2. the date of redemption of voucher, in all other cases.

4.Time of Supply in case of interest, late fees etc :.

It is a normal practice in business for the supplier to charge late payment interest for payment by the customer beyond the stipulated period of credit. Such amounts form the part of transaction value vide section 15(2) of the CGST Act and as such the liability to pay arises in case of such payments. However, these are not often known at the time of the actual provision of services. As pec section 13(6) of the CGST Act the time of supply to the extent it relates to an addition in the value of supply by way of interest, late fee or penalty for delayed payment of any consideration shall be the date on which the supplier receives such addition in value.

5. Where time of supply not determinable as per the aforesaid discussion Where it is not possible to determine the time of supply based on the aforesaid provisions of law the time of supply shall be: –

  1. in a case where a periodical return has to be filed, be the date on which such return is to be filed. Here the due date needs to be considered and not the actual date in case of delayed filing.
  2. in any other case, be the date on which the tax is paid.

6.  Some tips for the Auditors:

  1. The auditor must do proper scrutiny of debtor ledgers and make a tracker of date of actual provision of services, date of payment received and date of invoices to determine the tax period in which tax liability arises and interest if any payable thereon.
  2. The auditor must obtain details of every advance received and classify it as security deposit where no liability arises or advance towards provision of service where the liability arises.
  3. The auditor must make the use of above tracker to identify double payment or non -payment of tax.
  4. The auditor must verify that the client issues proper receipt vouchers, refund vouchers, payment and invoices and highlight significant deviations.
  5. The auditor must do proper test of controls to determine the extent of substantive procedures especially when he is not the statutory or tax auditor of the auditee enterprise.

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