Gst Rate Change Implications

Goods and Service Tax has just completed its first year. The basic intention behind the introduction of Goods and Service Tax was to make India ‘One nation, one market, one tax’. However, with the rollout of Goods and Service Tax, tax slab for various goods and services changed. Generally, goods and services are divided into 5 tax slabs under GST. The five tax slabs are 0%, 5%, 12%, 18% and 28%. Basically, all the goods and services that are essentials attracts 0% or 5% GST rates and on the other hand items/services with the highest luxury and de-merit goods attract higher rates. Due to various representation from the respective field, demanding change in GST rates, GST council needs to come up with frequent change in rate every now and then effecting taxation of various goods and services. In this article, we look at the various Gst Rate Change Implications. 1

Factors Affecting Applicable Rates

In order to determine the applicable, rates in case of a change in rates, the following three events are crucial –

Date of issue of an invoice;
Date of payment;
Period of completion of supply.

In order to decide the appropriate rate in a given situation, one needs to answer the above three events. Provisions of Change In Rate of Tax In Respect of Supply of Goods Or Services Provisions of change in the rate of tax are contained under section 14 of the Central Goods and Service Tax (CGST) Act, 2017. It must be noted that section 14, overrules section 12 (time of supply of goods) and section 13 (time of supply of services). In other words, in case of the change in a rate of tax, provisions of section 14 are applicable in determining the time of supply of goods or services. Provisions of section 14 are divided into two parts –

When goods or services or both have been supplied before the change in the rate of tax (i.e. supply affected before the change in rate); and
When goods or services or both have been supplied after the change in the rate of tax (i.e. supply affected after the change in rate).

Let us analyze the first part i.e. supply being affected before the change in rate with the table provided below –

Invoice	Payment	Applicable Time of Supply	Applicable Rate
Invoice issued after the change in rate	Payment received after the change in rate	Date of payment or date of invoice, whichever earlier	New rate
Invoice issued before the change in rate	Payment received after the change in rate	Date of invoice	Old rate
Invoice issued after the change in rate	Payment received before the change in rate	Date of payment	Old rate

Let us analyze the second part i.e. supply being affected after the change in rate with the table provided below –

Invoice	Payment	Applicable Time of Supply	Applicable Rate
Invoice issued before the change in rate	Payment received before the change in rate	Date of payment or date of invoice, whichever earlier	Old rate
Invoice issued before the change in rate	Payment received after the change in rate	Date of payment	New rate
Invoice issued after the change in rate	Payment received before the change in rate	Date of invoice	New rate

Further it needs to be noted that, as per provisions of section 14 of the Central Goods and Service Tax (CGST) Act, 2017, the date of receipt of payment shall be –

The date on which the payment is entered in the books of account of the supplier; or
The date on which the payment is credited to the bank account of the recipient, whichever earlier.

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Frequently Asked Questions

Common questions about GST Rate Change Implications on Goods and Services.

The three events - date of issue of invoice, date of payment, and period of completion of supply - are crucial in determining the applicable GST rate when there is a change in the tax rate. The interplay of these three events determines whether the old rate or the new rate will apply, as per the provisions of Section 14 of the CGST Act, 2017.

If the invoice is issued before the change in GST rate, but the payment is received after the change in rate, the old rate (the rate applicable before the change) will be applicable. This is in accordance with the provisions of Section 14 of the CGST Act, 2017.

If the invoice is issued after the change in GST rate, but the payment is received before the change in rate, the old rate (the rate applicable before the change) will be applicable. This is because the date of payment or date of invoice, whichever is earlier, will be considered as the time of supply, as per Section 14 of the CGST Act, 2017.

As per Section 14 of the CGST Act, 2017, the date of receipt of payment shall be the earlier of: (a) the date on which the payment is entered in the books of account of the supplier, or (b) the date on which the payment is credited to the bank account of the recipient.

Yes, Section 14 of the CGST Act, 2017 overrules Sections 12 (time of supply of goods) and 13 (time of supply of services). In case of a change in the rate of tax, the provisions of Section 14 are applicable in determining the time of supply of goods or services, and consequently, the applicable GST rate.

Under the GST regime, goods and services are divided into five tax slabs: 0%, 5%, 12%, 18%, and 28%. Essentials attract 0% or 5% GST rates, while luxury and de-merit goods attract higher rates of 18% and 28%.

The GST Council needs to make frequent changes in GST rates due to various representations from respective fields, demanding changes in tax rates for certain goods and services. These changes are made to address the concerns and requirements of different sectors and industries.

The basic intention behind the introduction of the Goods and Services Tax (GST) in India was to make India 'One nation, one market, one tax'. The aim was to simplify the indirect tax system and create a unified national market for goods and services.

The Harmonized System of Nomenclature (HSN) code is a standardized numerical method of classifying traded products. Under the GST regime, HSN codes are used to identify goods for the purpose of applying the appropriate GST rate and ensuring uniformity in classification across the country.

No, the provisions of Section 14 of the CGST Act, 2017 cannot be overridden by any other section or provision. Section 14 specifically states that it will override Sections 12 and 13 related to the time of supply of goods and services, in case of a change in the rate of tax.