Critical study of provisions of CENTRAL GOODS AND SERVICES TAX ACT, 2017–( in short CGST) Section 12 about time of supply of goods which is part of ‘CHAPTER IV – Time and Value of supply’ and relevant portion of section 31 – relating to Tax Invoice. –Tenth article in the series.

[DEV KUMAR KOTHARI]

Section 12 governs provision relating to time of supply  of goods. This section is also very complex due to many options and events out of which ‘earlier one’ or ‘earliest one’  may have to be ascertained in resect of each transaction of supply of goods. Furthermore,   we find that  in this section:

One Explanations is found in section 12

‘Provided that’ appears 2 times

Amendment took place  once  in sub-section 2 vide Central Goods and Services Tax (Amendment) Act, 2018 w.e.f 01-02-2019 before it was read as "sub-section (1) of" after amendment it reads section 31. This is a consequential amendment.

So difficult drafting is to some extent is lesser than in some other provisions.

There is no provision with expressions  ‘notwithstanding’ , ‘provided further’,’ ‘as may be prescribed’.

To that extent it can be said that the section 12  is a bit less complex. However, reference of Section 31 relating to  ‘tax invoice’ which is very important   for S. 12 make it complex, because in  S.31 following expressions have been used

PROVIDED THAT – 3 TIMES

NOTWITHSTANDING – 2 TIMES

Explanation – 1 Explanation is found.

Subject to  - 4 times

Subject to such conditions – 2 times

As may be prescribed – 9 times.

And the use is in respect to ‘tax invoice’ for ‘supply of goods’  and ‘supply of services’  in different situations. Many of provisions are common for both and some are specific for supply of goods and some relates to supply of services.

Therefore, in this article attempt is made for critical analysis of provisions of S.12 and relevant part of Section 31 for goods. Section and observations by way of high lights and additional observations are placed in suitable tables by dividing provisions for easy comprehension and understanding:

CENTRAL GOODS AND SERVICES TAX ACT, 2017	Other GST laws are on similar lines with suitable adaptations.
CHAPTER IV - TIME AND VALUE OF SUPPLY	The Chapter IV  contains S.12 to 15 which are  about time and value of supply of goods and services. Section wise discussions will be made in series.

 

12. Time of supply of goods.

This section is about supply of goods only and covers mixed  and composite supplies also.

 

(1) The liability to pay tax on goods shall arise at the time of supply, as determined in accordance with the provisions of this section.	Liability to pay tax is linked to the time of supply, which is to be determined in accordance with the provisions of S.12.
	Use of words ‘shall arise’, make it mandatory.

 

(2) The time of supply of goods shall be the earlier of the following dates, namely:-	‘shall be’ makes it mandatory. Different situations are prescribed ,’earlier date’ will be the date of supply. Expression ‘earliest’ is not used as is used in sub-section (3)  relating to supply received under RCM.
(a) the date of issue of invoice by the supplier or the last date on which he is required, under 1[****] section 31, to issue the invoice with respect to the supply; or	Notes 1. Omitted vide Central Goods and Services Tax (Amendment) Act, 2018 w.e.f 01-02-2019 before it was read as "sub-section (1) of"
(b) the date on which the supplier receives the payment with respect to the supply:
Provided that where the supplier of taxable goods 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 in respect of such excess amount.	This provision may be superficial in many situations when excess payment  received is to be refunded or adjusted against supply in future. Why such petty situations are considered to make law complex is not understandable. What if amount received is in excess of more than R. 1000 which may be refundable?
Explanation 1.––For the purposes of clauses (a) and (b), “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 deeming provision also appears to be superficial. As per common practices, supply is valued as per invoice and any short payment is receivable and excess payment received is refundable or adjustable against supply in future.   Controversy may arise, if a view is taken that supply is covered only by amount of payment, if payment received is less than invoice value.
Explanation 2.––For the purposes of clause (b), “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.	This provision also seems un-necessary. In case of cash received, it is entered in books of account on date of receipt rather time of receipt. Whereas in case of payment received by way of credit in bank the entry is made on such credit. If an entry is made on the basis of cheque received, it is provisional and is subject to realization of cheque. If cheque  received and deposited is credited in books of account and later bounces, the entry made has to be reversed.

 

(3) 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, namely:-	The word ‘earliest’ has been used here as against word ‘earlier’ in sub-section (2)
(a) the date of the receipt of goods; or
(b) 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	Here recipient is means recipient of goods and not recipient of payment this is made clear by  debited in his bank account
(c) the date immediately following thirty 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.

 

(4) In case of supply of vouchers by a supplier, the time of supply shall be-

(a) the date of issue of voucher, if the supply is identifiable at that point; or

(b) the date of redemption of voucher, in all other cases.

 

(5) 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––

(a) in a case where a periodical return has to be filed, be the date on which such return is to be filed; or

(b) in any other case, be the date on which the tax is paid.

 

(6) 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.

Provision relating to ‘Tax Invoice’ so far relevant to supply of goods are reproduced below with highlights for analysis. Further observations will be covered in article on S.31 in the series.

CHAPTER VII

TAX INVOICE, CREDIT AND DEBIT NOTES

Tax invoice

31. (1) A registered person supplying taxable goods shall, before or at the time of,-

(a) removal of goods for supply to the recipient, where the supply involves movement of goods; or

(b) delivery of goods or making available thereof to the recipient, in any other case,

issue a tax invoice showing the description, quantity and value of goods, the tax charged thereon and such other particulars as may be prescribed:

Provided that the Government may, on the recommendations of the Council, by notification, specify the categories of goods or supplies in respect of which a tax invoice shall be issued, within such time and in such manner as may be prescribed.

(2) XXX not relevant   - relates to services

 (3) Notwithstanding anything contained in sub-sections (1) and (2)––

(a) a registered person may, within one month from the date of issuance of certificate of registration and in such manner as may be prescribed, issue a revised invoice against the invoice already issued during the period beginning with the effective date of registration till the date of issuance of certificate of registration to him;

(b) a registered person may not issue a tax invoice if the value of the goods or services or both supplied is less than two hundred rupees subject to such conditions and in such manner as may be prescribed;

(c) a registered person supplying exempted goods or services or both or paying tax under the provisions of section 10 shall issue, instead of a tax invoice, a bill of supply containing such particulars and in such manner as may be prescribed:

Provided that the registered person may not issue a bill of supply if the value of the goods or services or both supplied is less than two hundred rupees subject to such conditions and in such manner as may be prescribed;

(d) a registered person shall, on receipt of advance payment with respect to any supply of goods or services or both, issue a receipt voucher or any other document, containing such particulars as may be prescribed, evidencing receipt of such payment;

(e) where, on receipt of advance payment with respect to any supply of goods or services or both the registered person issues a receipt voucher, but subsequently no supply is made and no tax invoice is issued in pursuance thereof, the said registered person may issue to the person who had made the payment, a refund voucher against such payment;

(f) a registered person who is liable to pay tax under sub-section (3) or sub-section (4) of section 9 shall issue an invoice in respect of goods or services or both received by him from the supplier who is not registered on the date of receipt of goods or services or both;

(g) a registered person who is liable to pay tax under sub-section (3) or sub-section (4) of section 9 shall issue a payment voucher at the time of making payment to the supplier.

(4) In case of continuous supply of goods, where successive statements of accounts or successive payments are involved, the invoice shall be issued before or at the time each such statement is issued or, as the case may be, each such payment is received.

(5)   XXX   not relevant   - relates to services

(6) xxxx  not relevant   - relates to services

(7) Notwithstanding anything contained in sub-section (1), where the goods being sent or taken on approval for sale or return are removed before the supply takes place, the invoice shall be issued before or at the time of supply or six months from the date of removal, whichever is earlier.

Explanation.––For the purposes of this section, the expression “tax invoice” shall include any revised invoice issued by the supplier in respect of a supply made earlier.

 General observations:

It seems that in law different hypothetical situations have also been considered to take care of any contingencies, which may happen very casually and rarely. Such contingencies may have impact for short duration. Such impact may disappear on subsequent events.

However, the provisions have been made so complex that it may be difficult to strictly follow and apply the same even for large organizations.

This creates lot of scope of enquiries and investigation. For example, for ascertaining ‘time of supply’, each transaction may require to examine different possibilities to find out exact impact and to ascertain ‘time of supply’. Strictly speaking for each supply covered in one invoice there can be several  point of ‘time of supply’.  

For example we find the following FAQ on GST (2nd Edition) dated 31.3.2017

Q 6. Suppose, part advance payment is made or invoice issued is for part payment, whether the time of supply will cover the full supply?

Ans. No. The supply shall be deemed to have been made to the extent it is covered by the invoice or the part payment.