GST – Point of Taxation

In today’s article, we will discuss the point of taxation. We all know about taxable events i.e. any event, the occurrence of which results in the liability to pay tax. Under previous laws of indirect tax laws, manufacture, sales, provision of services etc. were known as taxable events. However, under GST all these events are summed up in the definition of supply. Taxable event under GST will include any supply of any goods and services or both in course for the furtherance of a business.

Another concept to be clarified is regarding ‘point of taxation’, we know what taxable event is, but the point in the course of this transaction where these goods or services are to be taxed is known as the point of taxation.

Chapter IV of  CGST Act,2017 states the norms relating to the point of supply. It clearly specifies that the liability to pay tax on goods as well as on services arises at the time of supply.

Now the important thing is to determine what is ‘time of supply’. Section 12 and Section13 define what time of supply is in reference to goods and services respectively.

Time of supply for goods (Section 12)

First, let’s discuss time of supply of goods. Section 12 of the Act states the following provisions regarding the determination of time of supply;

Here, the criteria is that earlier of the following will be considered at the time of supply:

  1. Date when the invoice is issued, or the last day on which supplier is required to issue the invoice.
  2. Date on which the supplier received the payment. Here this date will be the earlier of the following: the date on which entry regarding this payment is entered in the books of accounts, date on which entry regarding this payment is entered in the books of accounts, date on which payment amount is credited from his account.

In case of Reverse Charge

The second discussion is regarding goods on which tax is paid or is liable to be paid on reverse charge basis. In such cases, time of supply will be earliest of the following:

  • Date on which goods are received.
  • Date of payment, it will be the earlier of the following:

When such payment is entered in the books of accounts of the recipient.

When the bank account of the recipient is debited with the payment amount.

  • Date immediately following 30 days from the date of issue of invoice or any other document issued in lieu of it by the supplier.

If it can’t be determined based on these given dates, then the date of entry of supply in the books of accounts of the recipient will be considered as the time of supply. 

In case of voucher

If any person is engaged in the supply of vouchers, then they have different criteria regarding the determination of the time of supply as they are different in nature as compared to other goods. These criteria are:

– Date when these vouchers are issued, if it possible to identify them, or

– Date of redemption of such vouchers.

Time of supply for Services (Section 13)

In case of services, time of supply is to be determined based on the following conditions;

Time of supply will be the earliest of the following:

  • Date when the invoice is issued or date of receipt of payment, whichever is earlier
  • If the invoice is not issued within prescribed period, then the date of provision of services or date of receipt of payment, whichever is earlier

Here this date will be the earlier of the following:

– Date on which the entry regarding this payment is entered in the books of accounts of the supplier.

– Date on which payment amount is credited to his account.

  • In case of point 1 and 2 don’t apply, date of receipt of services shown in the books of accounts of the recipient.

In case of reverse charge

In the case of supply of services on which the tax is paid or is liable to be paid on the reverse charge basis, the time of supply will be the earliest of the following:

  • Date of payment, it will be the earlier of the following:

When the bank account of the recipient is debited with the payment amount.

When such payment is entered in the books of accounts of the recipient.

  • Date immediately following 60 days from the date of issue of invoice or any other document issued in lieu of it by the supplier.

If it can’t be determined based on these given dates, then the date of entry of supply in the books of accounts of the recipient will be considered as the time of supply.

However if such supply of services is affected by any associated enterprise located outside India, then the time of supply will either be the date of entry of supply in the books of the accounts of the recipient or the date of payment, whichever is earlier.

In case of vouchers

Here time of supply is determined in exactly the same way as it was done in the case of goods. The following dates will be considered as the date of supply:

– Date when these vouchers are issued, if it’s possible to identify them, or

– Date of redemption of such vouchers.

In the case of non-determination of such time of supply of goods or services based on the criteria discussed in the given headings, the following dates can be considered as the time of supply:

– If the supplier is liable to periodical returns, then such is the date of filing.

– In any other case, date of payment of taxes.

In Case of Increase in the Value of Supply of Goods or Services

If there is any increase in the value of supply, then the given principles are to be followed in order to determine the time of supply. Such increase in the value of supply can be because of any two reasons:

  1. If such increase is a result of interest on the principal amount, late fee or penalty, then the date of supply will be the date on which such addition is received by suppliers.
  2. If the supplier receives any amount more than 1000 rupees in excess of the amount indicated on the invoice. Here the supplier has a choice to fix the time of supply for such excess amount as the date of issue of the invoice in respect of such amount.