Understanding Continuous Supply Provisions for Goods and Services in GST

In the context of the Goods and Services Tax (GST) framework, a continuous supply refers to an ongoing process where products or services are provided regularly, and corresponding payments are typically made at periodic intervals, such as monthly. A common illustration for goods is the consistent delivery of construction materials like bricks to a builder over an extended period. Similarly, telecommunication and internet services exemplify a continuous supply of services, involving recurring provisions from service providers.

Continuous Supply of Goods

A continuous supply of goods is defined as the provision of goods, either currently or in the future, on a constant or repetitive schedule, as per a contractual agreement. This type of supply can be facilitated through various channels, including wires, cables, pipelines, or similar conduits. Typically, the supplier issues invoices to the recipient at regular intervals for such supplies.

Time of Issuing Invoice for Continuous Supply of Goods

For continuous goods supply, invoices must be issued either before or at the moment each statement of account is provided, or when each payment is collected. For instance, a supplier providing bricks would generate an invoice for every new batch delivered.

Continuous Supply of Services

A continuous supply of services is characterized by services rendered, or to be rendered, on an ongoing or repetitive basis under a contract. This arrangement must span a duration exceeding three months and include defined periodic payment responsibilities.

Time of Issuing Tax Invoice for Continuous Supply of Services

When the Due Date of Payment is Identifiable from the Contract

If the contract specifies the payment due date, the invoice should be issued either before or after the payment is due from the recipient, strictly within the prescribed timeframe. This applies regardless of whether the supplier has actually received the payment. An example is a telecom company sending monthly phone bills, as stipulated in their service agreement.

When the Due Date of Payment is Not Identifiable from the Contract

Should the contract not specify the payment due date, the invoice must be generated either before or after the supplier receives each payment, adhering to the specified time limits.

When Payment is Linked to the Completion of an Event

If payments are contingent upon the completion of a particular event, the invoice should be issued either before or after that event concludes, within the stipulated timeframe.

When the Supply of Services Ceases Under a Contract Before Completion

If the provision of services under a contract terminates prematurely, the invoice must be issued at the point of cessation. This invoice should cover only the services rendered up to the date of discontinuation. For instance, if a works contract began in August 2017 and was scheduled for completion in March 2018 but ceased on November 11, 2017, the contractor would issue an invoice on November 11, 2017, for the work completed until that date.

Specified Time for Invoice Issuance

Invoices generally need to be issued within 30 days of the completion of each contract-specified event that triggers a payment obligation for the recipient.

Special Rules for Financial Service Providers

For service providers like banks, financial institutions, or Non-Banking Financial Companies (NBFCs), the invoice issuance deadline extends to 45 days from the date the service was supplied. Furthermore, both the Central and State Governments hold the authority to designate specific goods or services as continuous supplies through official notifications.

Conclusion

The GST framework ensures that tax liability is triggered at the earliest possible point, often through various events like invoice generation, payment receipt for goods and services, or the completion of specific contractual milestones for services. This mechanism highlights the government's objective to facilitate timely tax collection.

For more details on various GST terms and related information, consult our other resources.

You can also explore our blog to learn about the place of supply.