What is Time of Supply?

The concept of Time of Supply is covered under Section 12 of the CGST Act, 2017. Time of Supply refers to the right time when goods / services are considered as actually ‘supplied’. With time of supply, the supplier can pay the right amount of GST to the Government for the right period. Since GST is paid on monthly basis, time of supply becomes an essential instrument for taxing supplies for the right period / month. For example, if a supplier knows that the time of supply of his transaction is 12th March, 2021, here this transaction will be accountable for the month of March. The collected GST will be paid and return will be filed in the next month i.e. April. This is possible only when the concept of Time of Supply is applied. 

Time, Place and Value of Supply have to go hand in hand for every transaction so that the right amount of GST reaches the Government at the right time in the right manner (CGST / SGST / IGST).

Determination of Time of Supply

There are several points to be considered before determining the Time of Supply. The first thing to be seen is Section 31 of the CGST Act to understand the due date of issuing tax invoice. Invoice is document containing details of a transaction which is issued by the supplier. Details like Supplier's Name, Date, Invoice No., GSTIN, Particulars of Goods / Service, Quantity, Rate, Amount, HS Code and GST thereupon. A tax invoice is the most valid document when it comes to GST based transactions and plays the most important role in determining the Time of Supply. But before jumping into Time of Supply, let's understand what is the due date (most appropriate time) of issuing a tax invoice.

GOODS

Goods - Due Date for Issuing Tax Invoice as per Section 31 of the CGST Act, 2017.

1. When there is movement of goods, tax invoice shall be issued before of at the time of removal of goods. 

2. When there is no movement of goods, tax invoice shall be issued before or at the time of handing over goods to the recipient.

3. When there is continuous supply of goods where successive statements of accounts or successive payments are involved, the tax invoice shall be issued before or at the time each such statement or each receipt of payment.

4. When goods are sent on approval basis, the tax invoice shall be issued before or at the time of supply (date of approval) OR six months from the date of removal of such goods, whichever is earlier.

TIME OF SUPPLY FOR FORWARD CHARGE CASES [Section 12(2)]

Time of supply of goods is earliest of: 

1. Date of issue of invoice

OR

2. Due Date of invoice (as per Sec. 31) 

OR

3. Date of receipt of payment. * (Notification No. 66/2017 dated 15-11-2017)

Note: 

(a) For 3, the date on which the payment is entered in the books OR the date on which the payment is credited to bank account, whichever is earlier.

(b) Date of advance received is not considered.

(c) Not applicable to non - Composition dealers.

*   Irrelevant for non-composition dealers.

Illustrations on Time of Supply for Goods under Forward Charge Cases:

1. Mr. Kashinath, Mumbai placed an order for taxable goods with Aggarwal Enterprises, Bhopal on 28.02.2021. Goods were removed from the warehouse of Aggarwal Enterprises on 02.03.2021 and were delivered to Mr. Kashinath in Mumbai on 03.03.2021. Aggarwal Enterprises raised the tax invoice on 28.02.2021.

Solution:

• Section 31

As there is movement of goods, the Due Date of issuing Tax Invoice should be on or before removal of such goods (02.03.2021).

• Section 12: Time of Supply

Time of Supply is earliest of the following:

1. Actual Date of Tax Invoice (28.02.2021)

OR

2. Due Date of Tax Invoice (02.03.2021)

Time of Supply = 28.02.2021

2. Mr. Shrinivas went to Manyawar Shop and placed an order for Sherwani on 1st March, 2021 and paid an advance of Rs. 1,000/-. Manyawar issued tax invoice for the entire amount on that date itself with an advance note. Mr. Shrinivas collected the Sherwani on 5th March, 2021 from Manyawar Shop and paid the balance amount. Identify Time of Supply.

Solution: Time of supply will be date of invoice or due date of invoice (Section 31), whichever is earlier. Here, Time of Supply will be 1st March, 2021 as the date of invoice is earlier that the due date of invoice i.e. 5th March, 2021.

3. Mr. Nair (KL) gets an order from Mr. Reddy (TL) for supply of 20 Aquaguard machines on 18th March, 2021. The date of invoice being the same day. The delivery service company picked up the goods from Mr. Nair on 21st March, 2021 and delivered to Mr. Reddy on 26th March, 2021.

Solution: Time of supply will be date of invoice or due date of invoice (Section 31), whichever is earlier. Here, Time of Supply will be 18th March, 2021 as the date of invoice is earlier than the due date of invoice i.e. 21st March, 2021.

4. Mr. Patel (GJ) got an order from Mr. Singh (PB) for supply of 30 washing machines on 18th May, 2020. The date of invoice being the next day. The delivery service company picked up the goods from Mr. Patel on 18th May, 2020 itself and delivered to Mr. Singh on 22nd May, 2020.

Solution: Time of supply will be date of invoice or due date of invoice (Section 31), whichever is earlier. Here, Time of Supply will be 18th May, 2020 as as the due date of invoice is earlier than the actual date of invoice i.e. 19th May, 2020.

5. Determine Time of Supply from the following information:

A machine has to be supplied at a site. It is done by sourcing various components from vendors and assembling the machine at a site. Details are as follows:

17th October, 2020 – Purchase order with an advance of Rs. 50,000 received for goods worth Rs. 4,00,000 and entry made in seller’s books of accounts.

20th October, 2020 – The machine is assembled, tested at site and accepted by the buyer.

23rd October, 2020 – Invoice raised by the seller.

4th November, 2020 – Balance payment of Rs. 3,50,000 received.

Solution: Time of supply will be date of invoice or due date of invoice (Section 31), whichever is earlier. Here, Time of Supply will be 20th October, 2020 as due date of invoice is earlier than actual date of invoice i.e. 23rd October, 2020. Date of payment will not be considered while determining time of supply for goods as per wide notification 66/2017.

TIME OF SUPPLY FOR CONTINUOUS SUPPLY OF GOODS

Continuous supply involves contracts made for goods which are supplied on periodical basis for which payment is also received periodically. Such supplies are recurring in nature and are usually as per contract. Eg. contract for supply of cement and bricks for construction of a building within a year where payment can be received periodically with every dispatch.  Another example can be supply of 10 liter water can on a periodical basis under a monthly billing contract. Supply of gas through pipeline on continuous basis which is subject to monthly billing is also an example of continuous supply of goods.

In continuous supply, the due date of issuing tax invoice shall be before or at the time each such statement made by the supplier or each receipt of payment. This date should be compared with the actual date of invoice and the earliest one will be the Time of Supply. 

Illustrations on Time of Supply for Goods under Continuous Supply:

1. Raw materials were supplied by Eetwala Enterprises to Lokhandwala Builders under a one-year contract. The materials were delivered on 10th March, 2021 and payment was received 25th March, 2021 which was entered in the books of Eetwala Enterprises on 26th March, 2021. Eetwala Enterprises issued tax invoice on 30th March, 2021. Determine Time of Supply.

Solution:  Time of supply will be date of invoice or due date of invoice (Section 31), whichever is earlier. Here, Time of Supply will be 25th March, 2021 as due date of invoice (earlier 25th March, 2021 or 26th March, 2021) of is falling earlier than the actual date of invoice i.e. 30th March, 2021.

2. Ambhuja Ltd. supplied Black Cement to Mr. Taimur Khan for his housing project. The materials were delivered on 10th March, 2021 and payment was received 25th March, 2021 which was entered in the books of Ambhuja Ltd. on 26th March, 2021. Ambhuja Ltd. dispatched tax invoice along with the goods. Determine Time of Supply.

Solution: Time of supply will be date of invoice or due date of invoice (Section 31), whichever is earlier. Here, Time of Supply will be 10th March, 2021 as date of invoice of is falling earlier than the due date of invoice i.e. earlier 25th March, 2021 or 26th March, 2021.

TIME OF SUPPLY FOR REVERSE CHARGE MECHANISM CASES [Section 12(3)]

For the recipient of goods, the time of supply under Reverse Charge Mechanism will be earliest of:

1. Date of receipt of goods by the recipient.

OR

2. Date on which payment is entered in the books or the date when the payment is debited from the bank a/c.

OR

3. 31st day from the date of issue of invoice or any legal document by the supplier supporting the transaction.

Illustration on Time of Supply of Goods under RCM:

1. Mr. Kajukar, an agriculturist supplies 100 kgs of unpeeled cashew to M/s. Fridgewasi, a registered farsan dealer. 

1st April, 2020: Placement of order.

10th April, 2020: M/s Fridgewasi receives the goods.

15th April, 2020: Mr. Kajukar issues a bill of supply.

20th April, 2020: M/s Fridgewasi makes payment and records in his books of accounts.

25th April, 2020: Amount deducted from M/S Fridgewasi’s account.

Solution: Time of Supply will be earlier of date of receipt of goods or date of payment or 31st day from date of invoice. In this case, the Time of Supply will be 10th April, 2020 as the date of receipt of goods is earlier than date of payment and 31st day from the date of invoice i.e 20th April, 2020 and 16th May, 2020 respectively.

2. From the following information, determine time of supply under reverse charge mechanism.

1st October, 2020: Bill of supply issued by the supplier

5th October, 2020: Date of Receipt of Goods

10th October, 2020: Date of Payment entered in the books of accounts

12th October, 2020: Date of payment debited from the bank account

Solution: Time of Supply will be earlier of date of receipt of goods or date of payment or 31st day from date of invoice. In this case, the Time of Supply will be 5th October, 2020 as the date of receipt of goods is earlier than date of payment and 31st day from the date of invoice i.e 10th October, 2020 and 1st November, 2020 respectively.

3. From the following information, determine time of supply under reverse charge mechanism.

1st October, 2020: Bill of supply issued by the supplier

15th October, 2020: Date of Receipt of Goods

10th October, 2020: Date of Payment entered in the books of accounts

12th October, 2020: Date of payment debited from the bank account

Solution: Time of Supply will be earlier of date of receipt of goods or date of payment or 31st day from date of invoice. In this case, the Time of Supply will be 10th October, 2020 as the date of payment (entered in the books) is earlier than the receipt of goods and 31st day from the date of invoice i.e 15th October, 2020 and 1st November, 2020 respectively.

4. From the following information, determine time of supply under reverse charge mechanism.

1st October, 2020: Bill of supply issued by the supplier

15th November, 2020: Date of Receipt of Goods

18th November, 2020: Date of Payment entered in the books of accounts

20th November, 2020: Date of payment debited from the bank account

Solution: Time of Supply will be earlier of date of receipt of goods or date of payment or 31st day from date of invoice. In this case, the Time of Supply will be 1st November, 2020 as the 31st day from the date of invoice is earlier than the date of  receipt of goods and the date of payment i.e 15th November, 2020 and 18th November, 2020 respectively.

TIME OF SUPPLY FOR VOUCHER FOR GOODS [Section 12(4)]

 A Voucher is a small printed piece of paper issued by an organization (the sponsoring company) that entitles the holder (the one to whom the voucher is issued) to avail goods against the voucher or in discount considering terms and conditions.

Example, Red Bull issued vouchers to a few students of SIES College, Mumbai which can be exchanged for a can of Red Bull at any local shops in Mumbai. If the student hands over this voucher to the shop keeper, he shall get a can of Red Bull either free of cost or at a discounted value as per the terms and conditions.

Such vouchers can be of two types:

1. Single Purpose Voucher: These are vouchers issued for a specific item where the voucher holder can buy only that particular product. 

Time of Supply for Single Purpose Voucher is the 'date of issue of voucher'.

Eg. Rs. 500/- voucher issued by Levis brand to Mr. Shantilal on 15th February, 2021 exclusively for Levis jeans. This voucher is valid till 31st March, 2021. Mr. Shantilal made a purchase against the voucher on 20th February, 2021. If the MRP of the jeans is Rs. 399/-, there will not be any refund for the unutilized amount. But if the MRP of the jeans is Rs. 599/-, then Mr. Shantilal will have to pay Rs. 99/- extra. Here, Time of Supply will be 15th February, 2021 being the date of issue of voucher.

2. General Purpose Voucher: These are vouchers issued for any item where the voucher holder can buy any product as per the terms and conditions. These are issued by infinity retailers who deal in many brands and products.

Time of Supply for General Purpose Voucher is the 'date of redemption of such voucher'.

Eg. On 1st March, 2021, a voucher of Rs. 1,000/- was issued by Lifestyle Mall to Ms. Shivani where any product of any brand can be purchased. This voucher is valid till 31st March, 2021. Ms. Shivani visited Lifestyle Mall on 20th March, 2021 and bought various products worth Rs. 3,000/-. Here, Time of Supply will be 20th March 2021 being the date of redemption of voucher.

SERVICES

Services - Due Date for Issuing Tax Invoice as per Section 31 of the CGST Act, 2017.

1. When taxable services are supplied, invoice shall be issued within a period of 30 days from the date of supply of such service. The same is 45 days for Banking, Insurance and Non Banking Financial Companies.

2. In a case where the supply of services ceases under a contract before the completion of the supply, the invoice shall be issued at the time when the supply ceases.

3. In case of continuous supply,

a. If due date of payment is ascertainable, then invoice shall be issued on or before the due date of such payment.

b. If due date of payment is not ascertainable, then invoice shall be issued on or before the receipt of payment.

c. If the payment is linked to completion of event, then invoice shall be issued on or before the completion of that event.

TIME OF SUPPLY FOR SERVICES UNDER FORWARD CHARGE [Section 13(2)]

Case I: If invoice is issued on time, the Time of Supply will be

1. Date of Invoice

OR

2. Date of receipt of payment

Whichever is earlier

Case II: If invoice is not issued in time, the Time of Supply will be

1. Date of completion of service.

OR

2. Date of receipt of payment.

Whichever is earlier

Illustrations on Time of Supply for Services under Forward Charge Cases:

1. Mr. Saikumar booked an appointment at Scissor Palace Salon, Mumbai for style haircut, body massage and spa treatment on 14th March, 2021. The services was performed at Scissor Palace Salon outlet in Mumbai on 15th March, 2021 and tax invoice was raised on the same day. Mr. Saikumar made the payment on 16th March, 2021. Determine the Time of Supply.

Solution: As invoice is issued on 15th March, 2021 which is within 30 days from the date of supply of service, we can say that invoice has been issued on time. Hence, Time of Supply will be the date of invoice or date of payment, whichever is earlier. Here, Time of Supply will be 15th March, 2021 as date of invoice is earlier to the date of payment i.e. 16th March, 2021.

2. On 5th March, 2021, Ms. Kuku booked an airline ticket to travel from Mumbai to Bengaluru on 20th March, 2021. She made the payment while booking itself and an online ticket was issued to her through mail by the airline company. The tax invoice was mailed to her on the date of boarding the flight. Determine time of supply for the airline company.

Solution: As invoice is issued on 20th March, 2021 which is on the date of supply of service, we can say that invoice has been issued on time. Hence, Time of Supply will be the date of invoice or date of payment, whichever is earlier. Here, Time of Supply will be 5th March, 2021 as date of payment is earlier to the date of invoice i.e. 20th March, 2021.

3. Mr. Shakehar availed tax consultancy services from M/s. Taxeshwar (registered in Delhi) on 5th April, 2020. Invoice was issued by M/s. Taxeshwar on 12th May, 2020 but payment was made by Mr. Shakehar on 10th April, 2020. Determine Time of Supply for M/s. Taxeshwar.

Solution: As invoice is issued on 12th May, 2020 which is beyond 30 days from the date of supply, we can say that the invoice has not been issued on time. Hence, Time of Supply will be the date of completion of service or the date of payment, whichever is earlier. Here, Time of Supply will be 5th April, 2020 as date of completion of service is earlier to date of payment i.e. 10th April, 2020. 

4. Enigma Ltd is an Export Management Company registered in Kerala. They provided export consultancy services to Iqra Enterprises on 10th April, 2021 amounting to Rs. 20,000/-. Iqra Ltd. paid an advance of Rs. 5,000/- on 8th April, 2021 and the balance on 16th May, 2021. Invoice for this service was issued on 15th April, 2021. Determine time of supply for Enigma Ltd.

Solution: As payment is made by Iqra in two parts, we will have to determine time of supply for both the payments.

• For the advance of Rs. 5,000/- received on 8th April, 2021 - Time of Supply will be earlier of date of invoice or date of payment as invoice is issued on time. Hence, Time of Supply will be 8th April, 2021. 

• For the balance of Rs. 15,000/- received on 16th May, 2021 - Time of Supply will be earlier of date of invoice or date of payment as invoice is issued on time. Hence, Time of Supply will be 15th April, 2021.

5. Enigma Ltd is an Export Management Company registered in Kerala. They provided export consultancy services to Iqra Enterprises on 10th April, 2021 amounting to Rs. 20,000/-. Iqra Ltd. paid an advance of Rs. 5,000/- on 8th April, 2021 and the balance on 16th May, 2021. Invoice for this service was issued on 15th May, 2021. Determine time of supply for Enigma Ltd.

Solution: As payment is made by Iqra in two parts, we will have to determine time of supply for both the payments.

• For the advance of Rs. 5,000/- received on 8th April, 2021 - Time of Supply will be earlier of date of completion of service or date of payment. Hence, Time of Supply will be 8th April, 2021.

• For the balance of Rs. 15,000/- received on 16th May, 2021 - Time of Supply will be earlier of date of completion of service or date of payment. Hence, Time of Supply will be 10th April, 2021.

TIME OF SUPPLY FOR SERVICES UNDER REVERSE CHAGE MECHANISM [Section 13(3)]

Time of supply of services under reverse charge mechanism is the earliest of: 

1. Date of recording payment in the books of the recipient of services.

OR

2. Date on which payment is debited from the recipient’s bank account. 

OR

3. 61st day from the supplier’s invoice.

Illustrations on Time of Supply for Goods under Reverse Charge Cases:

1. Mr. Santosh an advocate provided legal services to Manish Enterprises for Rs. 45,000/- on 1st October, 2020 and issued a bill of supply on the same day. On 5th October, 2020, the amount got deducted from Manish Enterprise's bank account and the same was entered in their books on 6th October, 2020. Determine time of supply for Manish Enterprises under RCM.

Solution: Time of Supply shall be the date of payment or 61st day from the date of invoice, whichever is earlier. Here, Time of Supply will be 5th October, 2020 as date of amount deduction is earlier to 61st day from the date of invoice i.e. 2nd December, 2020.

TIME OF SUPPLY FOR VOUCHER FOR SERVICES [Section 13(4)]

 A service voucher is a small printed piece of paper issued by an organization (the sponsoring company) that entitles the holder (the one to whom the voucher is issued) to avail services against the voucher or in discount considering terms and conditions.

Example, Pizza Hut issued vouchers to few employees of Dominos so as to promote business. These vouchers can be exchanged for a Small Pizza up to Rs. 199/- at any Pizza Hut outlets. If the voucher holder hands over this voucher to the outlet, he gets entitled to receive a small pizza up to that amount either free of cost or at a discounted value as per the terms and conditions.

Such vouchers can be of two types:

1. Single Purpose Voucher: These are vouchers issued for a specific item where the voucher holder can buy only that particular service. 

Time of Supply for Single Purpose Voucher is the 'date of issue of voucher'.

Eg. Mr. Kamlesh holds a voucher of Water Kingdom which allows him to get a free entry. The voucher was issued to him on 10th May, 2020  but he redeemed the service (entry) on 15th May, 2020. Hence, Time of Supply will be the 10th May, 2020 being the date of issue of such voucher. 

2. General Purpose Voucher: These are vouchers issued for any item where the voucher holder can buy any product as per the terms and conditions. These are issued by infinity retailers who deal in many brands and products.

Time of Supply for General Purpose Voucher is the 'date of redemption of such voucher'.

Eg. Mr. Akbar received a Multi Specialty voucher on 10th May, 2020 and availed various service on 15th May, 2020. Here, Time of Supply will be 15th May, 2020 being the date of redemption of such services.