It's important for GST registered enterprises to know the concept of time of supply, as it determines the time when the liability for payment of tax arises. The time of supply for goods and services differs based on the transaction type. Hence, time of supply of goods and/or services can be categorised into time of supply of goods, time of supply of services, continuous supply of goods, goods liable for payment of tax on reverse charge basis, supply of goods on approval or return basis, services liable for payment of tax on reverse charge basis and residue cases.
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For service, the time of supply is the earliest of date of issue of invoice by the service provider or the last day by which the service provider is required to issue invoice or the date of receipt of payment. All service provider are required to issue invoice before or after provision of service or time prescribed for issuance of invoice.
Date of receipt of payment is the earlier of date of receipt of payment or the date the payment was entered in the book of accounts of service provider or the date on which the payment is credited to the service provider’s bank account.
In case a contract for providing service is cancelled before the supply of the service is completed, the invoice for the portion of supply completed should be issued at the time when the contract is cancelled or supply ceases.
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Continuous supply of service has been defined under GST as supply of services which has been agreed to be provided continuously or on recurrent basis under a contract for a period exceeding three months with periodic payment obligations. Time of supply for continous supply of services will be the earlier of date of invocie or receipt of payment.
During continuous supply of services, invoices must be issued before or after the payment is made but within the time mentioned in the contract, whether or not the payment has been received - for contracts where the due date for payment is mentioned in the contract. If the date of payment is not mentioned in the contract, the invoice should be issued before or after each time the payment is received by the service provider. Finally, in case payment is linked to completion of an event, the invoice must be issued before or after the time of completion of event.
Under GST, recipient of goods is sometimes made liable for payment of GST. Instances where the recipient is made liable for GST is called reverse charge. For services liable for payment of tax on reverse charge basis, the time of supply of services is the earliest of the date on which the payment is made or the date immediately following 60 days from the date of issue of invoice by the supplier.
In case of an associated enterprise, where the supplier of services is located outside of India, the time of supply of services would be the earlier of date of payment by recipient or date of receipt of services in the books of accounts of recipient. If it is not possible to determine the time of supply of services by the above methods, then the time of supply would be the date of entry in the books of accounts.
For some services, vouchers are supplied for consideration which entities the recipient to certain services. If a voucher entitles the recipient to buy certain services at a certain value, then the time of supply would be the time of redemption of voucher. If the voucher entities the recipient to buy a specific service, the time of supply would be the time of supply of voucher.
In case it is not possible to determine the time of supply of services by the use of any of the above methods, then the residue method can be applied for determining the time of supply. Under residue method, the time of supply would be the date on which the periodical GST return has to be filed. If not return is to be filed, the time of supply would be the date on which CGST//SGST is paid.