Understanding Time of Supply for Services under GST

The concept of 'point of taxation' establishes the specific moment when goods or services are considered supplied. This timing is crucial for setting the applicable tax rate, determining the value of the supply, and establishing the deadlines for tax payments. Under the GST framework, the obligation to pay CGST (Central Goods and Services Tax) and SGST (State Goods and Services Tax) for services commences at the determined time of supply, as outlined by GST regulations. Distinct rules apply to the time of supply for goods and services. A separate guide is available for understanding the time of supply for goods. The liability to pay CGST/SGST on services will arise at the time of supply as specified by GST provisions.

Determining the Time of Supply for Services

To ascertain the time of supply for services, one must identify the earliest of the following dates:

• If an invoice is issued within the stipulated period: The date of the invoice or the date payment is received, whichever occurs first.
• If an invoice is not issued within the stipulated period: The date the service was rendered or the date payment is received, whichever occurs first.
• When neither of the above clauses applies: The date the service recipient records the service in their accounting records. This date must be either before the service provision or within 30 days following the service provision, adhering to invoicing regulations (with exceptions for insurance, banking, or financial institutions).

If a service provider receives an amount up to Rs. 1000 exceeding the invoice value, the time of supply for this additional sum can, at the supplier's discretion, be the invoice date.

For the first two scenarios (invoice issued or not issued on time):

• The supply is considered made to the extent covered by the invoice or the payment.
• The date of payment receipt is the earlier of:
  • The date the payment was recorded in the supplier's books.
  • The date the payment was credited to the supplier's bank account.

Example:

Suppose the invoice date is May 15, 2018, payment is received on July 10, 2018, and the supplier records the payment on July 11, 2018. In this case, the time of supply is May 15, 2018 (the invoice date, which is earlier than the payment receipt date).

Time of Supply under Reverse Charge Mechanism

Under the reverse charge mechanism, the responsibility for paying tax shifts from the supplier to the recipient of goods or services.

For reverse charge services, the time of supply is the earliest of these dates:

• The payment date.
• The date exactly sixty days following the supplier's invoice issuance date. (Note: For goods, this period is 30 days.)

If the time of supply cannot be determined using the above methods, it defaults to the date the service recipient records the entry in their books of account.

For the payment date clause, the payment date is defined as the earlier of:

1. The date on which the recipient recorded the payment in their accounting records.
2. The date on which the payment was debited from the recipient's bank account.

Supplier Located Outside India

For 'associated enterprises' where the service supplier is outside India, the time of supply is the earlier of:

• The date the entry is recorded in the recipient's books of account.
• The date of payment.

Example for Reverse Charge:

Suppose the payment date is July 15, 2018, the invoice date is July 1, 2018, and the entry in the receiver's books is July 18, 2018. According to the rules, the earliest of the payment date (July 15, 2018) or 60 days after the invoice date (August 30, 2018) is July 15, 2018. Thus, the time of supply of service would be July 15, 2018. If, for any reason, the time of supply could not be determined by the primary rules, it would then be July 18, 2018, which is the date of entry in the receiver's books.

Time of Supply for Vouchers

For voucher supplies, the time of supply is determined as follows:

• The date the voucher is issued, provided the specific supply associated with the voucher can be clearly identified at that time.
• The date the voucher is redeemed, in all other scenarios where the supply is not identifiable at issuance.

Provisions for Undeterminable Time of Supply

Should the time of supply remain undeterminable using the aforementioned rules, it will be established as:

1. The due date for filing a periodic tax return.
2. The date when the CGST/SGST is paid, in any other scenario.

Under the GST framework, the tax collection event is always the earliest of the stipulated dates. The various triggers for tax levy, such as invoice issuance, payment, or service completion, underscore the government's objective to collect tax at the earliest possible moment. This concept represents a significant change for businesses accustomed to previous VAT and Central Excise regimes. Given the numerous factors involved in determining the time of supply, businesses may encounter complexities in reconciling their revenue records between financial statements and GST compliance.