Critical study of provisions of CENTRAL GOODS AND SERVICES TAX ACT, 2017–( in short CGST) Section 13 about time of supply of services which is part of ‘CHAPTER IV – ‘Time and Value of supply’ and relevant portion of section 31 – relating to Tax Invoice. –Eleventh article in the series.

[DEV KUMAR KOTHARI]

Section 13 governs provision relating to time of supply of  services . 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 respect of each transaction of supply of services. Furthermore,   we find that in this section also:

One Explanations is found in section 13

‘Provided that’ appears 2 times

‘‘Provided further’ appears once.

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 (2) of section 31 after amendment it reads section 31. This is a consequential amendment.

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

To that extent it can be said that the section 13  is less complex. However, reference of Section 31 relating to  ‘tax invoice’ which is very important   for S. 13 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 an attempt is made for critical analysis of provisions of S.13 and relevant part of Section 31 for services. 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.
13. Time of supply of services.	This section is about supply of services only including continuous supply of services.

 

(1) The liability to pay tax on services 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 of services, which is to be determined in accordance with the provisions of S.13 which requires to ascertain earlier or earliest of time of supply of service some point of times are deemed as per provisions. Thank god, earlier or earliest date is considered and not exact time in hours, minutes and seconds.
	Use of words ‘shall arise’, make it mandatory.

 

(2) The time of supply of services shall be the earliest of the following dates, namely:-	‘shall be’ makes it mandatory. Different situations are prescribed ,’earliest date’ will be the date of supply.
(a) the date of issue of invoice by the supplier, if the invoice is issued within the period prescribed under 1[****] section 31 or the date of receipt of payment, whichever is earlier; or
(b) the date of provision of service, if the invoice is not issued within the period prescribed under 1[****] section 31 or the date of receipt of payment, whichever is earlier; or	****** Notes 1. Substituted vide Central Goods and Services Tax (Amendment) Act, 2018 w.e.f 01-02-2019 before it was read as "sub-section (2) of"
(c) 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:	It will be difficult for the supplier to know the date of receipt recorded by recipient of service.
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.	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?
.––For the purposes of clauses (a) and (b)––
(i) 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 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.
(ii) “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.	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 earlier of the following dates, namely:––	Word ‘Earlier’ has been used and not ‘earliest’ , as used in sub-section (2)
(a) 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  means recipient of  service  and not recipient of payment this is made clear by  debited in his bank account
(b) the date immediately following sixty 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), the time of supply shall be the date of entry in the books of account of the recipient of supply:
	In case of services  received which are liable  under RCM ,date of receipt of service is not provided as is in case of date of receipt of goods under RCM. This seems to be a case of inadvertent omission.
Provided further that 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.	Here also date of receipt of service is not provided.

 

(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 services ( including common provisions for goods and services) are reproduced below with highlights for analysis. Further observations will be covered in article on S.31 in the series.

CENTRAL GOODS AND SERVICES TAX ACT, 2017

CHAPTER VII

TAX INVOICE, CREDIT AND DEBIT NOTES

Tax invoice

31. (1) xx relates to goods

 (2) A registered person supplying taxable services shall, before or after the provision of service but within a prescribed period, issue a tax invoice, showing the description, value, tax charged thereon and such other particulars as may be prescribed:

¹[Provided that the Government may, on the recommendations of the Council, by notification,-

(a) specify the categories of services or supplies in respect of which a tax invoice shall be issued, within such time and in such manner as may be prescribed;

(b) subject to the condition mentioned therein, specify the categories of services in respect of which-

(i) any other document issued in relation to the supply shall be deemed to be a tax invoice; or

(ii) tax invoice may not be issued.]

(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) xxxx relates to goods 

(5) Subject to the provisions of clause (d) of sub-section (3), in case of continuous supply of services,––

(a) where the due date of payment is ascertainable from the contract, the invoice shall be issued on or before the due date of payment;

(b) where the due date of payment is not ascertainable from the contract, the invoice shall be issued before or at the time when the supplier of service receives the payment;

(c) where the payment is linked to the completion of an event, the invoice shall be issued on or before the date of completion of that event.

(6) In a case where the supply of services ceases under a contract before the completion of the supply, the invoice shall be issued at the time when the supply ceases and such invoice shall be issued to the extent of the supply made before such cessation.

(7) xxxx relates to goods only 

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.

 *************

NOTES:-

1. Substituted vide Finance Act, 2020 dated 27-03-2020 w.e.f. 01-01-2021 before it was read as

"Provided that the Government may, on the recommendations of the Council, by notification and subject to such conditions as may be mentioned therein, specify the categories of services in respect of which––

(a) any other document issued in relation to the supply shall be deemed to be a tax invoice; or

(b) tax invoice may not be issued."

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. 

In the above question amount of invoice and payment is same therefore, time of supply  has not covered full supply.

However, if invoice is issued for full supply then part payment received in advance will have time of supply as date of receipt of part payments as advance from time to time, and balance receivable will have time of supply as date of invoice. If date of actual supply is earlier then the date of actual supply will be time of supply.

 Change in rate of tax:

Where change in rate of tax takes  place, the time of supply will have to be decided according to provisions of S.14 in various circumstances based on date of issue of invoice and receipt of payment if any of these is prior to or later than date of revised rate of tax. In this series article on S.14 will be written and discussed in another article.