WFYI logo

Understanding GST: Time, Place, and Value of Supply

This article details the crucial concepts of time, place, and value of supply under India's GST regime. It explains how these factors influence the type of tax levied, the tax payment due dates, and the amount on which GST is calculated. The post outlines specific rules for both goods and services, including considerations for reverse charge mechanisms and special provisions for various service types, ensuring accurate tax compliance.

📖 4 min read read🏷️ Supply

Understanding GST: Time, Place, and Value of Supply

In India's Goods and Services Tax (GST) regime, determining the correct tax payable involves understanding three crucial aspects: the time of supply, the place of supply, and the value of supply. These factors dictate the type of tax (CGST, SGST, or IGST), the payment deadline, and the amount on which GST is levied. The GST Act provides specific guidelines for each scenario to ensure proper tax application.

Importance of Time, Place, and Value of Supply

Recognizing the exact time, location, and monetary worth of a supply is fundamental for accurate GST compliance:

  • Time of Supply: This refers to the moment when goods or services are considered to have been provided. It helps suppliers identify the precise due date for remitting their tax obligations.
  • Place of Supply: This factor is essential for determining the appropriate GST component to be charged on an invoice, differentiating between Intra-state (CGST + SGST) and Inter-state (IGST) transactions.
  • Value of Supply: Since GST is calculated as a percentage of the supply's value, correctly assessing this value is paramount. Any miscalculation here will lead to an incorrect GST amount being charged.

Time of Supply

The "time of supply" indicates when goods or services are deemed to be supplied, which in turn establishes the tax payment deadline. Whether CGST and SGST, or IGST, is due, it must be paid at this specific time. The criteria for determining the time of supply vary for goods and services.

Time of Supply for Goods

For goods, the time of supply is established as the earlier of the following dates:

  • The date the invoice is issued, or the final date by which the invoice should have been issued. For goods involving physical movement, the invoice must be issued at the time of their dispatch or removal. In other instances, it should be issued upon delivery to the recipient.
  • The date payment is received.

Important Notes:

  • Should a supplier receive an amount up to INR 1,000 in excess of the invoice value, they have the option to consider the time of supply for this additional amount as the date the invoice was issued.
  • The supply is considered to have occurred only to the extent covered by the invoice or payment, whichever is applicable.
  • The date of payment receipt is the earlier of:
    • The date the payment is recorded in the supplier's books.
    • The date the payment is credited to the supplier's bank account.

Example:

If an invoice is dated May 15, 2021, payment is received on July 10, 2021, and the supplier records the payment on July 11, 2021, the time of supply would be May 15, 2021.

Time of Supply for Services

For services, the time of supply is the earlier of these dates:

  • If the invoice is issued within the stipulated period, it is the date of invoice issuance or the date payment is received, whichever comes first.
  • If the invoice is not issued within the prescribed period, it is the date the service was provided or the date payment was received, whichever is earlier.
  • If neither of the above clauses applies, the time of supply is the date on which the recipient records the receipt of services in their accounting records.

Important Notes:

  • Invoices should typically be issued before the service provision or within 30 days after, except for specific sectors like insurance, banking, or financial institutions.
  • Similar to goods, if an amount up to INR 1,000 exceeds the invoice value, the supplier can choose the invoice date as the time of supply for this excess.
  • The supply is considered made to the extent covered by the invoice or payment.
  • The date of payment receipt is the earlier of:
    • The date the supplier records the payment in their books.
    • The date the payment is credited to the supplier's bank account.

Time of Supply under Reverse Charge Mechanism (RCM)

Under the Reverse Charge Mechanism (RCM), the responsibility for paying tax lies with the recipient of goods or services, rather than the supplier.

For RCM, the time of supply is the earliest of the following dates:

In Case of GoodsIn Case of Services
1. Date of goods receipt, OR1. Date of payment or the date the payment is debited from the bank account, whichever is earlier, OR
2. Date of payment or the date the payment is debited from the bank account, whichever is earlier, OR2. Date immediately after sixty (60) days from the invoice issue date by the supplier, OR
3. Date immediately after thirty (30) days from the invoice issue date by the supplier.3. Date of invoice issuance by the recipient, if the recipient is required to issue the invoice.
If the time of supply cannot be determined by the above methods, it is the date of entry in the recipient's books of account.If the time of supply cannot be determined by the above methods, it is the date of entry in the service receiver's books of account.

Example for Goods:

If goods are received on May 15, 2021, payment is made on July 15, 2021, and the invoice is dated June 1, 2021, the time of supply is May 15, 2021 (date of receipt of goods). If these methods fail, and the entry date in the receiver's books is May 18, 2021, that would be the time of supply.

Example for Services:

M/s ABC Pvt. Ltd received services from Director Mr. X for INR 50,000 on January 15. The invoice was raised on February 1. M/s ABC Pvt Ltd paid on May 1. The time of supply for services will be the earliest of:

  • Date of payment = May 1
  • 60 days from invoice date = April 2
  • Date of invoice by recipient (if applicable) = February 1

Therefore, the time of supply of services is February 1.

Place of Supply

Understanding the "place of supply" is critical for correctly applying GST (Inter-state IGST or Intra-state CGST + SGST).

Example:

Location of RecipientPlace of SupplyNature of SupplyGST Applicable
MaharashtraMaharashtraIntra-stateCGST + SGST
MaharashtraKeralaInter-stateIGST

Place of Supply for Goods

Generally, the place where goods are delivered marks the place of supply. This means it is the location where ownership of the goods transfers.

If there is no physical movement of goods, the place of supply is the goods' location at the moment of delivery to the recipient. For instance, in a supermarket sale, the supermarket itself is the place of supply.

When goods are assembled and installed, the place of supply is the site where the installation occurs. For example, if a supplier in Kolkata sells machinery to a recipient in Delhi, and the machinery is installed at the recipient's factory in Kanpur, then Kanpur becomes the place of supply for the machinery.

Place of Supply for Services

Typically, the place of supply for services is the location of the service recipient. If the services are provided to an unregistered dealer and their location is unknown, the service provider's location will be considered the place of service provision.

Specific rules exist for determining the place of supply for certain services, including:

  • Services connected to immovable property.
  • Restaurant services.
  • Admission to events.
  • Transportation of goods and passengers.
  • Telecommunication services.
  • Banking, financial, and insurance services.

For services related to immovable property, the property's location determines the place of service provision.

Example 1:

Mr. Anil from Delhi offers interior design services to Mr. Ajay from Mumbai for a property in Ooty, Tamil Nadu. The place of supply will be Ooty, Tamil Nadu, which is the location of the immovable property.

Example 2:

A registered taxpayer offers passenger transport from Bangalore to Hampi. The passengers are not GST-registered. In this scenario, the place of supply is Bangalore, the point of departure.

Value of Supply for Goods or Services

The value of supply is the monetary amount a seller expects to receive for the goods and services provided. It is essentially the price collected by the seller from the buyer.

However, in situations involving related parties, where a fair market value might not be charged, or transactions involving barter or exchange, GST law mandates that the tax be calculated on the "transactional value." This transactional value represents the price at which unrelated parties would typically engage in business. This ensures that GST is correctly assessed and collected, even if the full value was not explicitly paid in monetary terms.

Frequently Asked Questions

What is the main distinction between CGST, SGST, and IGST?
CGST (Central GST) and SGST (State GST) are levied on intra-state supplies (within the same state), with both central and state governments sharing the revenue. IGST (Integrated GST) is applied to inter-state supplies (between different states) and imports, collected by the central government, and then apportioned to the states.
How does the destination principle apply to GST in India?
The destination-based consumption tax principle means that GST is ultimately borne by the consumer in the state where the goods or services are consumed, rather than where they are produced or supplied. This ensures tax revenue accrues to the consuming state.
Can I claim Input Tax Credit on all purchases under GST?
While Input Tax Credit (ITC) generally allows businesses to set off tax paid on inputs against output tax liability, there are certain 'blocked credits' under GST. These include ITC on motor vehicles (with some exceptions), food and beverages, membership fees, and goods/services used for personal consumption, among others.
What are the different types of GST returns business entities need to file?
Businesses registered under GST typically need to file various returns such as GSTR-1 (details of outward supplies), GSTR-3B (summary of outward and inward supplies with payment), and GSTR-9 (annual return). The specific returns and their frequency depend on the taxpayer's turnover and registration type.
How are e-way bills related to the movement of goods under GST?
An e-way bill is an electronic document required for the movement of goods exceeding a certain value (e.g., ₹50,000) from one place to another. It ensures that goods being transported comply with the GST law and helps track their movement to prevent tax evasion.