Time and Value of Supply

Whilst ‘Supply’ of goods and/or services is the threshold ‘taxable event’ for the levy of Goods and Services (GST) Tax, the same is further subject to the determination of factors/variables like the time, place (determination and levy of IGST) and valuation of such supply.

> Read more on ‘Supply’

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Levy and Exemption from GST

Chapter III and section 8* of the revised Draft Model GST Law (the Draft Law) provides the ‘charging’ mechanism with the following features and purposes –

  • Levy and collection of CGST/SGST at notified rates on the value (determined as per section 15 of the Draft Law) of ‘intra-state’ supply of goods and/or services
  • Such levy shall be paid by every ‘Taxable Person’ (subject to other provisions)
  • The Central/State Government may (on the recommendation of the GST Council) by notification, specify categories of supply of goods and/or services which will be subject to payment of said taxes on ‘reverse charge basis(i.e. paid by the recipient of such goods and/or services) and/or specify categories of services the tax on which shall be paid by the ‘electronic commerce operator(or its representative/appointee if not physically present in ‘taxable territory’), if such services are supplied through it


*
Section 5 of Draft IGST Law for levy and collection of IGST (Integrated Goods and Services Tax) on ‘Inter-State’ Supplies

As per Section 12 of the Draft Law, the liability to pay CGST/SGST (collectively GST) on ‘goods‘ would arise at the time of supply as determined in terms of its provisions (as detailed below).

The provision states that the said time of supply of ‘goods’ shall be the earlier of the following dates —

(a) Date of issue of invoice by the supplier or the last date on which he is required under section 28 (Tax invoice) to issue the invoice with respect to the supply; or

(b) Date on which the supplier receives the payment with respect to the supply.

> Where such supplier of taxable goods receives an amount up to Rs.1000 in excess of the amount indicated in the tax invoice, the time of supply to the extent of such excess shall, at the option of the said supplier, be the date of issue of invoice.

Explanation 1- For the above said purposes of clauses (a) and (b), the supply shall be deemed to have been made to the extent it is covered by the invoice or, as the case may be, the payment.

Explanation 2- For the purpose of clause (b), “the date on which the supplier receives the payment” shall be the date on which the payment is entered in his books of accounts or the date on which the payment is credited to his bank account, whichever is earlier.


Reverse Charge

Supplies in respect of which tax is paid or liable to be paid on ‘reverse charge’ basis, the time of supply shall be the earliest of the following dates —

(a) Date of the receipt of goods, or
(b) Date on which the payment is made, or
(c) Date immediately following 30 days from the date of issue of invoice by the supplier.

Where it is not possible to determine the time of supply under clauses (a), (b) or (c) above, the time of supply shall be the date of entry in the books of account of the recipient of supply.

Explanation- For the purpose of clause (b), “the date on which the payment is made” shall be the date on which the payment is entered in the books of accounts of the recipient or the date on which the payment is debited in his bank account, whichever is earlier.


Supply of Vouchers

In cases of supply of ‘vouchers’ (by whatever name called) by a supplier, the time of supply shall be —

(a) Date of issue of voucher (if supply is identifiable at that point); or
(b) Date of redemption of voucher (in all other cases).


Residual Methodology

Where it is not possible to determine the time of supply under the above stated provisions, the time of supply shall be as follows —

(a) Where a periodical return has to be filed, be the date on which such return is to be filed, or
(b) In any other case, be the date on which the GST is paid.


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As per Section 13 of the Draft Law, the liability to pay CGST/SGST (collectively GST) on ‘services’ would arise at the time of supply as determined in terms of its provisions (as detailed below).

The time of supply of services shall be the earlier of the following dates —

(a) Date of issue of invoice by the supplier or the last date on which he is required under section 28 (Tax Invoice) to issue the invoice with respect to the supply; or

(b) Date on which the supplier receives the payment with respect to the supply.

> Where such supplier of taxable service receives an amount up to Rs.1000 in excess of the amount indicated in the tax invoice, the time of supply to the extent of such excess shall, at the option of the said supplier, be the date of issue of invoice.

Explanation 1- For the purposes of clauses (a) and (b) above, the supply shall be deemed to have been made to the extent it is covered by the invoice or, as the case may be, the payment.

Explanation 2- For the purpose of clause (b), “the date on which the supplier receives the payment” shall be the date on which the payment is entered in his books of accounts or the date on which the payment is credited to his bank account, whichever is earlier.


Reverse Charge

Supplies in respect of which tax is paid or liable to be paid on ‘reverse charge’ basis, the time of supply shall be the earlier of the following dates —

(a) Date on which the payment is made, or
(b) Date immediately following 60 days from the date of issue of invoice by the supplier.

Where it is not possible to determine the time of supply under clause (a) or (b), the time of supply shall be the date of entry in the books of account of the recipient of supply.

In case of ‘associated enterprises’, where the supplier of service is located outside India, the time of supply shall be the date of entry in the books of account of the recipient of supply or the date of payment, whichever is earlier.

Explanation- For the purpose of clause (a), “the date on which the payment is made” shall be the date on which the payment is entered in the books of accounts of the recipient or the date on which the payment is debited in his bank account, whichever is earlier.


Supply of Vouchers

In cases of supply of ‘vouchers‘ (by whatever name called) by a supplier, the time of supply shall be —

(a) Date of issue of voucher (if supply is identifiable at that point); or
(b) Date of redemption of voucher (in all other cases).


Residual Methodology

Where it is not possible to determine the time of supply of services in the manner specified above, the time of supply shall be as follows —

(a) Where a periodical return has to be filed, be the date on which such return is to be filed; or
(b) In any other case, be the date on which the GST is paid.


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Notwithstanding the provisions of sections 12 (Time of supply of goods) or 13 (Time of supply of services), where there is a change in the rate of tax, the time of supply in respect of goods or services would be determined in the manner as provided in section 14 of the Draft Law (as detailed below).


Goods or Services supplied before the change in rate of tax

  • Where the invoice for the same has been issued and the payment is also received after the change in rate of tax, the time of supply shall be the date of receipt of payment or the date of issue of invoice, whichever is earlier; or
  • Where the invoice has been issued prior to change in rate of tax but the payment is received after the change in rate of tax, the time of supply shall be the date of issue of invoice; or
  • Where the payment is received before the change in rate of tax, but the invoice for the same has been issued after the change in rate of tax, the time of supply shall be the date of receipt of payment.


Goods or services supplied after the change in rate of tax

  • Where the payment is received after the change in rate of tax but the invoice has been issued prior to the change in rate of tax, the time of supply shall be the date of receipt of payment; or
  • Where the invoice has been issued and the payment is received before the change in rate of tax, the time of supply shall be the date of receipt of payment or date of issue of invoice, whichever is earlier; or
  • Where the invoice has been issued after the change in rate of tax but the payment is received before the change in rate of tax, the time of supply shall be the date of issue of invoice.

> The ‘date of receipt of payment‘ shall be the date of credit in the bank account when such credit in the bank account is after 4 working days from the date of change in the rate of tax.

Explanation- For the above said purposes, “the date of receipt of payment” shall be the date on which the payment is entered in the books of accounts of the supplier or the date on which the payment is credited to his bank account, whichever is earlier.


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Value of Supply

Section 15 (see below) of the Draft Law provides the formula for determining the ‘value’ of a taxable supply. This provision is however expected to be supplemented by valuation rules (yet to be drafted) to cover the expansive and growing list of goods, services and types of transactions pertaining to their supply.

As per section 15 of the Draft Law, the ‘value’ of taxable supply shall be determined as follows.


Transaction Value

Value of a supply of goods and/or services shall be the ‘Transaction Value(i.e. price actually paid/payable for the supply, where the supplier and recipient are not related and the price is the sole consideration).


Components of Value

Value of supply shall include

  • Any taxes, duties, cesses, fees and charges levied under any statute, other than the (SGST Act/CGST Act) and the Goods and Services Tax (Compensation to the States for Loss of Revenue) Act, 2016, if charged separately by the supplier to the recipient;
  • Any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods and/or services;
  • Incidental expenses, such as, commission and packing, charged by the supplier to the recipient of a supply, including any amount charged for anything done by the supplier in respect of the supply of goods and/or services at the time of, or before delivery of the goods or, as the case may be, supply of the services;
  • Interest or late fee or penalty for delayed payment of any consideration for any supply; and
  • Subsidies directly linked to the price excluding subsidies provided by the Central and State governments.

Explanation- The amount of subsidy shall be included in the value of supply of the supplier who receives the subsidy.


Discounts

The value of the supply shall not include any discount that is given 

(a) Before or at the time of the supply provided such discount has been duly recorded in the invoice issued in respect of such supply; and
(b) After the supply has been effected, provided that;

(i) Such discount is established in terms of an agreement entered into at or before the time of such supply and specifically linked to relevant invoices; and
(ii) Input tax credit has been reversed by the recipient of the supply as is attributable to the discount on the basis of document issued by the supplier.


Residual Methodology

Where the value of the supply of goods or services cannot be determined through the means of ‘Transaction Value‘, the same shall be determined in such manner as may be prescribed.


Notified Value

Notwithstanding anything above contained, the value of such supplies as may be notified by the Central or a State Government in this behalf on the recommendation of the GST Council shall be determined in such manner as may be prescribed.


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