Point of taxation means the point in time when goods have been deemed to be supplied or services have been deemed to be provided. The point of taxation enables us to determine the rate of tax, value, and due dates for payment of taxes.
The liability to pay CGST / SGST will arise at the time of supply as determined for goods and services. There are separate provisions for time of supply for goods and time of supply for services. To read about time supply of goods please click here.
The liability to pay CGST / SGST on the services shall arise at the time of supply as determined by GST provisions.
How to determine time of supply
The time of supply of services shall be the earlier of the following dates:-
(a) The date of issuing invoice (or the last day by which invoice should have been issued)
(b) The date of receipt of payment
-whichever is earlier
If the supplier of taxable service receives an amount up to Rs. 1000 rupees in excess of invoice amount, the time of supply for the extra amount shall be the date of issue of invoice (at the option of the supplier).
For clauses (a) and (b)- The supply shall be assumed to have been made to the extent it is covered by the invoice or the payment (as the case may be).
For clause (b)- the date of receipt of payment shall be earlier of-
(i) The date on which he entered the payment in his books
(ii) The date on which the payment is credited to his bank account
- Date of invoice 15th May 2018
- Date of receipt of payment 10th July 2018
- Date when supplier recorded receipt in books 11th July 2018
Time of supply will be 15th May 2018
Time of supply under reverse charge
Reverse charge means the liability to pay tax is by the recipient of goods/services instead of the supplier. In case of reverse charge, the time of supply shall be the earliest of the following dates—
(a) The date of payment
(b) The date immediately after SIXTY (60) days from the date of issue of invoice by the supplier (30 days for goods)
If it is not possible to determine the time of supply under (a), (b) or (c), the time of supply shall be the date of entry in the books of account of the receiver of service.
For clause (a)- the date of payment shall be earlier of-
1. The date on which the recipient entered the payment in his books
2. The date on which the payment is debited from his bank account
When supplier is located outside India
In case of ‘associated enterprises’, where the supplier of service is located outside India, the time of supply shall be-
(a) the date of entry in the books of account of the receiver
(b) The date of payment
-whichever is earlier
Example for reverse charge:
1. Date of payment 15th July 2018
2. Date of invoice 1st July 2018
3. Date of entry in books of receiver 18th July 2018
Time of supply of service 15th May 2018
If for some reason time of supply could not be determined supply under (a), (b) or (c) then it would be 18th July 2018 i.e., date of entry in books
Time of supply for vouchers
In case of supply of vouchers, the time of supply is-
(a) The date of issue of voucher, if the supply can be identified at that point
(b) The date of redemption of voucher, in all other cases
When time of supply cannot be determined
If it is not possible to determine the time of supply by the above provisions, then it will be-
1. The date on which a periodical return has to be filed
2. The date on which the CGST/SGST is paid, in any other case.
In GST regime, the tax collection event will be earliest of the dates as given above. The various events like issuing invoice/making payment in case of supply of goods /services or completion of event-in case of supply of service triggering the tax levy, confirms that the Government wants to ensure tax is collected at the earliest point of time. This will be altogether a new concept for the current VAT and Central Excise taxpayers.
There are multiple parameters in determining ‘time’ of supply. Thus, businesses will face a challenge to maintaining and reconciling between revenue as per financials and as per GST.