Section 12(6) of CGST Act 2017 - Time of Supply linked with GSTR-1

[Pradeep Jain]

As per Section 12(6) of CGST Act, 2017 relating to Time of Supply of Goods states that 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.

This means that the tax is payable on interest received for delayed payment. This was not payable in current excise regime but the same will be payable in proposed GST regime.

But this provision of time of supply has made the things more worse. The tax on such interest etc. is payable on the date of receipt of payment. But how the treatment of the same will be done in returns is not known.

It will create problems which can be explained with the help of an example.

Situation: The assessee has sold goods for ₹ 10,000 vide invoice no. 25 dated 1.8.16 and charged GST in the invoice. As per terms, payment is to be made within 60 days but the payment was received on 31.12.16 i.e. after the stipulated time. Thus he has issued a debit note to the customer for amount of interest @12% for delayed payment in January 2018 for ₹ 300/-. But the payment of such interest was received by him in May 2018.

Issue: The question here arises that since the assessee has issued the debit note hence he will have to reflect the same in his GSTR-1 Return of January 2018 when such debit note was issued and as such his liability to pay tax will arise in month itself.

However, as per Section 12(6) the time of supply relating to debit note issued shall be date on which such amount is received by assessee, thus the supply falls in May 2018. Hence, the tax is payable in May 2018 only. But there is no mention of treatment in GSTR-1 return. The return will create liability in the month in which debit note is raised. Hence, there should be provision in return for the same.

Moreover, it is written in terms and conditions that the payment should be made within a particular time and interest will be charges afterwards. But as trade practice, nobody ask for the interest on delayed payment. However, when the GST is payable on such interest, the department will insist that debit note should be raised for delayed payment and GST should be paid. 

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