Understanding the Point of Taxation for Goods in GST

Under Goods and Services Tax (GST) law, determining the "time of supply" is a crucial step for every transaction involving goods and services. This concept establishes the precise moment a supply is considered to have occurred, thereby pinpointing when a taxpayer's liability to pay taxes arises. This article focuses on explaining the time of supply specifically for goods under GST. A separate resource is available for understanding the time of supply for services.

Time of Supply Under Normal Charge

For supplies operating under the normal charge mechanism, the time of supply for goods is determined by the earliest of the following two dates:

• The date on which the invoice is issued, or the latest date by which the invoice should have been issued. If the supply includes the movement of goods, the invoice must be issued at the time of their removal. For other types of supplies, the invoice should be issued when the goods are delivered to the recipient.
• The date when the payment for the supply is received.

Important Considerations:

• If a supplier receives an amount up to Rs. 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.

• For both invoice issuance and payment receipt, the supply is deemed to have been made to the extent covered by the invoice or the payment, respectively.

• The date of payment receipt is defined as the earlier of:

  1. The date the payment is recorded in the supplier's books of account.
  2. The date the payment is credited to the supplier's bank account.

Example:

Consider these dates:

• Invoice Date: May 15, 2021
• Payment Receipt Date: July 10, 2021
• Supplier's Books Entry Date for Payment: July 11, 2021

Based on these details, the time of supply would be May 15, 2021.

Time of Supply Under Reverse Charge

The reverse charge mechanism shifts the tax payment responsibility from the supplier to the recipient of goods or services. In such cases, the time of supply for goods is the earliest of these dates:

• The date the goods are received.
• The date the payment is made.
• The date immediately following 30 days from the date the supplier issued the invoice (for services, this period is 60 days).

If the time of supply cannot be ascertained using any of the above criteria (a), (b), or (c), then the time of supply will be the date the entry is recorded in the recipient's books of account.

Notes on Payment Date (Clause b):

The date of payment is the earlier of:

• The date the recipient records the payment in their books.
• The date the payment is debited from the recipient's bank account.

Example:

Let's assume the following dates:

• Goods Receipt Date: May 15, 2021
• Payment Date: July 15, 2021
• Invoice Date: June 1, 2021
• Recipient's Books Entry Date: May 18, 2021

The time of supply for goods would be May 15, 2021. If, for any reason, the time of supply could not be determined from options (a), (b), or (c), then it would be May 18, 2021, which is the date of entry in the receiver's books.

Time of Supply for Vouchers

For the supply of vouchers, the time of supply is determined as follows:

• The date the voucher is issued, provided the specific supply for which the voucher can be redeemed is identifiable at that point.
• In all other situations, the date the voucher is redeemed.

When Time of Supply Cannot Be Determined

If the time of supply cannot be established using the provisions mentioned above, it will be considered:

• The due date for filing a periodical return.
• Alternatively, the date the tax is actually paid, in any other scenario.

Under the GST framework, the tax collection event is triggered by the earliest of the stipulated dates. This approach, which links tax levy to events like invoice issuance, payment, or completion of services, indicates the government's intention to collect tax as early as possible.

The existence of various parameters for determining the time of supply can pose challenges for businesses in reconciling their revenue figures between financial records and GST compliance.