TIME OF SUPPLY - A REVISIT

[Mr. M. GOVINDARAJAN]

Introduction

• In order to calculate and discharge tax liability it is important to know the date when the tax liability arises i.e., the date on which the charging event has occurred. In GST law, it is known as ‘Time of Supply’.
• GST law has provided separate provisions to determine the time of supply of goods and time of supply of services. Sections 12, 13 and 14 of the CGST Act, 2017, deal with the provisions related to time of supply and by virtue of section 20 of the IGST Act, 2017, these provisions are also applicable to inter-State supplies leviable to integrated tax.

Time of supply of goods

• The liability to pay tax on goods shall arise at the time of supply, as determined in accordance with the provisions of section 12 of the Act.
• Section 12(2) provides that the time of supply of goods shall be the earlier of the following dates-

1. the date of issue of invoice by the supplier or the last date on which he is required, under section 31, to issue the invoice with respect to the supply; or
2. the date on which the supplier receives the payment with respect to the supply.

• Where the supplier of taxable goods receives an amount up to Rs.1000/-  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 in respect of such excess amount.

• For the purposes of the above, ‘supply’ shall be deemed to have been made to the extent it is covered by the invoice or, as the case may be, the payment.

• For the purposes of the above, ‘the date on which the supplier receives the payment’ shall be the date on which the payment is entered in his books of account or the date on which the payment is credited to his bank account, whichever is earlier.

On reverse charge

• Section 12(3) provides that in case of supplies in respect of which tax is paid or liable to be paid on reverse charge basis, the time of supply shall be the earliest of the following dates-

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.

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.

Supply of vouchers

• Section 12 (4) provides that in case of supply of vouchers by a supplier, the time of supply shall be-

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

Misc

• Section 12(5) provides that where it is not possible to determine the time of supply under the provisions of sub-section (2) or sub-section (3) or sub-section (4), the time of supply shall–

• in a case where a periodical return has to be filed, be the date on which such return is to be filed; or
• in any other case, be the date on which the tax is paid.

• Section 12 (6) provides that 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.

Time of supply for services

• The liability to pay tax on services shall arise at the time of supply, as determined in accordance with the provisions of this section 13 of the Act.

• Section 13(2) provides that the time of supply of services shall be the earliest of the following dates-

1. the date of issue of invoice by the supplier, if the invoice is issued within the period prescribed under section 31 or the date of receipt of payment, whichever is earlier; or
2.  the date of provision of service, if the invoice is not issued within the period prescribed under section 31 or the date of receipt of payment, whichever is earlier; or
3. 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

Where the supplier of taxable service receives an amount up to Rs.1000/-  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.

For the purposes of clause(a) and clause (b)   the supply shall be deemed to have been made to the extent it is covered by the invoice or, as the case may be, the payment.   ‘The date of receipt of payment’ shall be the date on which the payment is entered in the books of account of the supplier or the date, on which the payment is credited to his bank account, whichever is earlier.

Reverse charge

• Section 13(3) provides that in case of supplies in respect of which tax is paid or liable to be paid on reverse charge basis, the time of supply shall be the earlier of the following dates-

1.  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
2. the date immediately following 60 days from the date of issue of invoice or any other document, by whatever name called, in lieu thereof by the supplier.

Where it is not possible to determine the time of supply under clause (a) or clause (b), the time of supply shall be the date of entry in the books of account of the recipient of supply.  In case of supply by associated enterprises, where the supplier of service is located outside India, the time of supply shall be the date of entry in the books of account of the recipient of supply or the date of payment, whichever is earlier.

Supply of voucher

• Section 13(4) provides that in case of supply of vouchers by a supplier, the time of supply shall be-

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

Misc

• Section 13(5) provides that where it is not possible to determine the time of supply under the provisions of sub-section (2) or sub-section (3) or sub-section (4), the time of supply shall-

• in a case where a periodical return has to be filed, be the date on which such return is to be filed; or
• in any other case, be the date on which the tax is paid.

• Section 13(6) provides that 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.

Some issues in Time of supply

The issues involved in time of supply are discussed with reference to the decided case laws by Authority for Advance Rulings/Appellate Authority for Advance Rulings.

Contribution to maintenance of common area

• IN RE: M/S. VAISHNAVI SPLENDOUR HOME OWNERS WELFARE ASSOCIATION [2019 (11) TMI 155 - AUTHORITY FOR ADVANCE RULING, KARNATAKA], the applicant is a ‘Home Owners’ Association in a residential complex.  The Association collects from its member’s annual contribution for maintenance of common area in residential complex. 

The Authority for Advance Ruling observed that the amount so collected is a deposit and utilized by association as and when required in case of exigencies. 

The Authority for Advance Ruling ruled that since at the time of collection, it is not related to any particular service, it is not taxable at that time.  However, at actual time of utilization same would be taxable with time of supply as determined under section 13 of the Act.

Liquidated damages

• IN RE: M/S. RASHTRIYA ISPAT NIGAM LTD. [2019 (1) TMI 1668 - AUTHORITY FOR ADVANCE RULING, ANDHRA PRADESH] the Authority for Advance Ruling ruled that the liquidated damages and other penalties like ‘milestone penalties’ are determined and imposed upon the contractor after in depth study.   In terms of the agreement, the clauses reveal that levy of liquidated damages is not when the delay occurs but the liability of payment of those liquidated damages by the contractor will be established once the delay is in successful execution of work is established on the part of the contractor and this would define the time of supply. 

Mobilization of Advance

• IN RE: M/S. SIEMENS LTD. [2019 (12) TMI 1244 - APPELLATE AUTHORITY FOR ADVANCE RULING, WEST BENGAL], the appellant had entered into a contract with Kolkata Metro Rail Corporation Limited in the pre GST period.  The appellant received a sum of Rs.16.33 crores on 24.06.2011 as mobilization advance which was 10% of the original contract value and is recoverable as adjustment towards the payment due for the tax invoices.  The amount of Rs.13.80 crores was outstanding as on 30.06.2017. 

The applicant sought an advance ruling as to whether GST shall be charged on the gross amount of the invoice raised under GST regime or net amount of invoice after adjustment of lump sum amount outstanding as on 30.06.2017.

The Authority for Advance Ruling ruled that the time of supply of services is to be guided by section 13(2) of the Act.  The remaining unadjusted amount as on 01.07.2017 is to be construed as if credited into applicant’s account on 01.07.2017 only. 

The Authority for Advance Ruling ruled that GST is attracted on such amount on that date itself.  The said amount would be considered as advance paid as on 01.07.2017.  In the absence of any exemption to mobilization advance from the tax under GST regime, the entire amount is taxable on the said date. 

The appellant filed appeal against this order.  The Appellate Authority upheld the rulings of the Authority for Advance Ruling.

Supply from principal to agent

• IN RE: M/S. TATA COFFEE LIMITED [2019 (10) TMI 943 - AUTHORITY FOR ADVANCE RULING, KARNATAKA] the Authority for Advance Ruling ruled that the time of supply in respect of supply from principal to agent is determined in terms of section 12(2) of the Act read with section 31(1).  The time of supply in such case would be the time of removal from principal’s premises to agent’s premises.  Further, time of second supply by agent to ultimate customer will not have any effect on value or time of supply of first supply.

Supply of port services

• IN RE: M/S. CHENNAI PORT TRUST [2019 (10) TMI 1204 - AUTHORITY FOR ADVANCE RULING, TAMILNADU], the applicant is engaged in supply of port services and incidental supply of goods like disposal of discarded assets.  

The applicant sought for advance ruling on the following questions-

• Whether on the facts and in the circumstances given in the application when the time of supply can be considered to occur with respect to providing continuous supply of services in the nature of renting immovable properties in the following four situations-

• The licencee does not react to the periodical reminder letters issued by the applicant and also does not pay the monthly license fee to the applicant.
• The licensee disputes amount of licence fee the periodical reminder letters issued by the applicant by means of reply letters and also does not pay the periodical license fee to the applicant.
• The licensee disputes the periodical reminder letters issued by the applicant asking for licence fee by initiating legal dispute before the legal forums like arbitration, court etc., as provided in the license agreement and does not pay the periodical license fee to the applicant; and
• The licencee disputes the periodically reminder letters issued by the applicant asking for licence fee by initiating legal dispute before the legal forums like arbitration, court etc., as provided in the license agreement; but pays under protest ad hoc amounts which are part of periodical license fee payable by the applicant under the expired license agreement.

The Authority for Advance Ruling ruled that in all the specified scenarios in the question when the licence for renting of immovable property is in force, but the licensee does not pay or pays only partially the periodical license fee to the applicant as agreed in the lease agreement, if the rent invoice is issued before the due date of payment as specified in the agreement.  The time of supply as determined by section 13(2) (a) of the CGST Act shall be the date of issue of invoice or Rent Claim Advice.  If the invoice is issued after the due date of payment, the time of supply as determined under section 13(2) (b) shall be the date of provision of service which is the end of recurrent period specified in the agreement after which rent/licence fee is to be paid.

Continuous supply

• IN RE : HP INDIA SALES PRIVATE LIMITED [2018 (10) TMI 1515 - AUTHORITY FOR ADVANCE RULING - MAHARASHTRA], the goods delivered by the applicant to the customer through reseller remain the property of the applicant and passed on to the customer through reseller only upon invoicing and receiving payment.  The supplies are made on continuous basis in accordance with the terms and conditions of the contract entered.  The applicant is required to raise invoice on periodic basis.  Therefore the supply of goods in the present case fulfill basic tenets of ‘continuous supply’ as defined in section 2(32) of CGST Act.  Accordingly the applicant is to raise invoice on or before 15^th day from the end of calendar month with respect to supplies made in the preceding month as person 31(4). 

The Authority for Advance Ruling ruled that the time of supply in the present case will be the earliest date between the date of invoice or date of payments with respect to impugned supply as per the provisions of section 12(2) of CGST Act.

• IN RE: VESUVIUS INDIA LTD. [2018 (8) TMI 771 - AUTHORITY FOR ADVANCE RULINGS WEST BENGAL],   the applicant is a supplier of end to end system solutions for controlled casting of iron and steel which includes supply of refractory components and associated services.  The applicant wanted to offer a new supply, viz., Contract Management System.      

The applicant sought for an advance ruling as to whether the activity proposed to be undertaken as Contract Management System will result in supply of goods or supply of services within the meaning of that term under the CGST/SGST Act, 2017 and the time of supply so determined.

The applicant submitted that the Contract Management System includes but not limited to application, installation and fixation of various refractories.  The applicant will sign the refractories required, monitor their usage and inventory and supply the required refractory components and systems.

The Authority for Advance Ruling ruled that the services of the applicant amount to continuous supply of service.

In regard to determine the time of supply the Authority for Advance Ruling ruled that the contract management system services involves monitoring of production process, quality control, supply and replacement of refractories provided to service recipient of hot metal.  The provisioning of service is measured on monthly basis and the date of payment is within 30 days from the end of the month, as per the agreement with the Customers, the tax invoice is to be issued in terms of section 31(5)(b) of CGST Act on or before the supplier receives the payment.

The Authority for Advance Ruling ruled that the time of supply shall be the date of issue of invoice in terms of Section 13(2) (a) read with section 31(2) of CGST Act, 2017.

Joint Development Agreement

• IN RE: M/S. DURGA PROJECTS AND INFRA STRUCTURE PRIVATE LIMITED [2019 (8) TMI 395 - AUTHORITY FOR ADVANCE RULING, KARNATAKA], the applicant has executed projects under Joint Development Agreement with owners for an agreed ratio of built-up area.  The construction was commenced during the pre–GST regime and continued under GST regime.  Substantial portion of the work has been sub contracted to another registered person. 

The applicant sought for an advance ruling on whether the applicant is liable for GST towards work executed under Joint Development Agreement on land owner’s portion where work commenced during pre-GST period and continued under GST Law. 

The Authority for Advance Ruling ruled that in terms of Notification No. 04/2018-Central Tax (Rate) the supplier of construction service to land owner in lieu of development rights is liable to pay GST at the time of transfer of property to the transferor of development rights by executing specified documents.   In the instant case, thus even if construction has commenced prior to GST regime, since it is continued post GST also, it is inferred that the possession of land owner’s share of flats has happened/would happen post GST regime.  The entire tax liability arises under GST law.

Booking purchases in the next month

IN RE: M/S. PASCO MOTOR LLP [2019 (2) TMI 1082 - AUTHORITY FOR ADVANCE RULING, HARYANA] the applicant purchases the goods from Tata Motors Limited form different locations. The goods remain in transit for roughly 5 to 10 days.  The question relates to the sale invoices which are raised in the end of month by the seller; but the material arrives at the end of the purchaser in the next month.   Since the returns are to be filed on monthly basis, a practical problem is being faced by the applicant that the purchases are being booked by the purchaser in the next month only.  In such a situation, when the applicant will be entitled to claim its input tax credit which stands charged and deemed to be paid by the seller in the previous month.

The Authority for Advance Ruling ruled that where the goods delivered later on but invoices raised earlier, the date of issue of invoice will be the time of supply for the purpose of determining period for filing of return and payment of tax for such supplies.  The liability to pay tax arises on the date basis of time of supply, which in this case supply of goods is earlier, of date of issue of invoice by supplier or last date on which he is required to issue invoice with respect to supply or date on which supplier receives payment with respect to supply.