CMA Intermediate · Direct and Indirect Taxation

Time and Value of Supply for CMA Inter GST

Time of supply fixes the date on which GST liability arises. Value of supply fixes the amount on which tax is charged. For time, find the earliest trigger date such as invoice or payment. For value, start with transaction value under section 15, add the inclusions, remove permitted discounts, and use the valuation rules only if the price cannot be relied on.

What this chapter covers

This chapter answers two questions about every supply under the CGST Act: when does the tax liability arise, and on what amount is tax charged. Time of supply decides the tax period in which you report the supply and pay tax. Value of supply decides the taxable base.

The time part has three layers: goods, services, and special cases such as reverse charge, vouchers and additions for interest or late fee. The value part starts with transaction value under section 15. It then lists what is added to that value, what is left out, and the fallback valuation rules for supplies where the price is not the sole consideration or the parties are related.

This chapter connects to the rest of the paper at several points. Levy and supply decide whether something is taxable. Time and value decide when and how much. Input tax credit, returns and invoicing all depend on the value and date you fix here. Numerical questions on GST liability or net tax payable almost always begin with a value computation from this chapter.

Almost every GST numerical needs a taxable value before it can compute tax, so a slip here carries into the whole answer. The chapter is also rule-based, which suits the MCQ section: a question can test one condition, such as the ₹1,000 excess-payment proviso or the discount conditions. In the written section, a clear list of inclusions and exclusions with a correct tax-inclusive calculation earns step marks even if a later part goes wrong.

Time and Value of Supply: topics in the order to study them

1Value of Taxable Supply: Transaction ValueStart with the base rule in section 15(1), because every other valuation topic is an addition to it or an exception from it.
2Inclusions and Exclusions in Value of SupplyStudy this next, since it holds most of the numerical content: section 15(2) inclusions and section 15(3) discounts.
3Valuation Rules and MethodsLearn the fallback methods once you know when transaction value fails: related persons, non-money consideration, and the cost-based and residual rules.
4Time of Supply of GoodsMove to timing with goods. Learn the exact conditions from the Act's section on time of supply of goods, and note which dates it uses, before you move to services.
5Time of Supply of ServicesServices follow a similar idea with a different set of dates, and section 13 sets them out in full: invoice date, date of provision of service, and date of receipt of payment.
6Time of Supply: Special CasesFinish with reverse charge, vouchers, the ₹1,000 excess proviso and interest or late fee, which only make sense after the basic rules.

How to prepare Time and Value of Supply

Treat this chapter as a set of rules with conditions. Learn each rule, then practise it on a small number.

Read section 15 line by line and write the transaction value rule in your own words. Note both conditions: the parties are not related, and the price is the sole consideration.
Make a two-column list for section 15(2) and 15(3). In one column put what is added: other-law taxes charged separately, supplier's liabilities paid by the recipient, incidental expenses, interest or late fee, and non-government subsidies linked to price. In the other put what is left out: eligible discounts.
Memorise the two routes to a valid discount. Either it is given before or at the time of supply and recorded in the invoice, or it is given later under an agreement made at or before supply, linked to specific invoices, with the recipient reversing the related input tax credit.
Practise tax-inclusive values with the formula tax = value inclusive of tax × rate ÷ (100 + sum of rates). For example, ₹1,18,000 inclusive of 18% GST gives tax = 1,18,000 × 18 ÷ 118 = ₹18,000, and a taxable value of ₹1,00,000.
Learn the order of the valuation rules for non-money consideration: open market value, then money plus the known money equivalent, then like kind and quality, then the cost rule (110% of cost) or the residual rule, in that order. Practise the phone and laptop illustrations in the rules.
For time of supply, draw a timeline for each case. Mark the invoice date, payment date and date of provision or receipt, and pick the earliest date that the rule allows. Practise with partial payments, because supply is treated as made to the extent covered by the invoice or payment.
Finish with mixed MCQs and one full written question. Write your steps in order: identify the supply, fix the time, list the inclusions, deduct eligible discounts, state the value, then compute tax.

Common mistakes in Time and Value of Supply

Treating every discount as deductible from value.
Fix: Check the two routes: invoice-recorded discount at or before supply, or a later discount tied to a prior agreement and specific invoices with input tax credit reversed by the recipient. If neither is met, do not deduct it.
Applying the tax rate directly to a tax-inclusive price.
Fix: Use tax = inclusive value × rate ÷ (100 + sum of tax rates), as in Rule 35, then subtract it. For ₹1,18,000 at 18% (CGST 9% + SGST 9%), tax = 1,18,000 × 18 ÷ 118 = ₹18,000, so the taxable value is ₹1,00,000, not ₹96,760 (₹1,18,000 less 18% of ₹1,18,000).
Adding government subsidies, or leaving out non-government ones.
Fix: Include only subsidies directly linked to price, and exclude those given by the Central or State Government.
Taking the first date in the facts as the time of supply.
Fix: List all dates, apply the rule's conditions, and pick the earliest qualifying one. Treat each part separately where there are advance or part payments.
Using the cost rule or residual rule too early for non-money consideration.
Fix: Follow the order strictly. Use the cost rule only when open market value, money plus equivalent, and like kind and quality are all unavailable.
Ignoring the related-person test.
Fix: Check the related-person list first. If the parties are related, transaction value does not apply automatically, and you move to the valuation rules.

Last-day revision: Time and Value of Supply

Transaction value is the price actually paid or payable, when the parties are not related and price is the sole consideration.
Section 15(2) adds: other-law taxes charged separately, supplier's liabilities borne by the recipient, incidental expenses such as commission and packing, interest or late fee on delayed payment, and non-government subsidies directly linked to price.
Subsidies from the Central or State Government are not added to value.
Taxes under the CGST, SGST, UTGST and GST (Compensation to States) Acts are not added under the 'other law' inclusion in section 15(2)(a).
A discount is excluded if given before or at supply and recorded in the invoice, or given later under a prior, invoice-linked agreement with the recipient reversing the related input tax credit.
Related persons include officers or directors of one another's businesses, legally recognised partners, employer and employee, and members of the same family. They also include persons where one directly or indirectly controls the other, both are controlled by a third person, or together they control a third person. A person who directly or indirectly owns, controls or holds 25% or more of the voting stock or shares of both of them also makes them related. Sole agents, sole distributors and sole concessionaires are deemed related to the other party.
Tax in an inclusive price = value inclusive of tax × rate ÷ (100 + sum of tax rates).
Non-money consideration: open market value first, then money plus its money equivalent, then like kind and quality, then the cost rule or residual rule in that order.
Cost rule: value = 110% of the cost of production, manufacture, acquisition or provision. Residual rule: use reasonable means consistent with section 15, and for services the supplier may opt for it, ignoring the cost rule.
Services: time of supply is the earlier of invoice date (if issued within the prescribed period) and payment date. If the invoice is not issued within that period, it is the earlier of provision date and payment date. If neither of these rules applies, it is the date the recipient shows receipt of the services in the books of account.
Services under reverse charge: the earlier of the payment date (the earlier of the recipient's book entry or bank debit) and the day after 60 days from the supplier's invoice date, or the date the recipient issues the invoice where the recipient has to issue it. If the time cannot be fixed under these clauses, it is the date of entry in the recipient's books. For supplies by associated enterprises where the supplier is located outside India, it is the earlier of the recipient's book entry and the date of payment.
Excess received up to ₹1,000 over the invoice amount can, at the supplier's option, have the invoice date for the excess as its time of supply. Interest or late fee is taxed when the supplier receives it.

Time and Value of Supply practice questions

Time and Value of Supply in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Time and Value of Supply: frequently asked questions

What is the difference between time of supply and value of supply?

Time of supply decides when the liability to pay GST arises, and so which tax period the supply belongs to. Value of supply decides the amount on which tax is charged. You usually fix the value first for the computation and the time to decide when to pay.

How do I find the time of supply of services?

Under section 13, take the earlier of the invoice date (if issued within the prescribed period) and the date of receipt of payment. If the invoice is not issued in time, use the earlier of the date of provision of service and the payment date. Supply is treated as made only to the extent covered by the invoice or payment.

How is value found when the consideration is not wholly in money?

Follow the rule in order. First use the open market value. If it is not available, use the money plus the known money equivalent of the non-money part. Then use the value of like kind and quality, and last the cost rule or residual rule. For example, a laptop sold for ₹40,000 plus a printer worth ₹4,000 is valued at ₹44,000 when its open market value is not known.

Is the 110% of cost rule always applicable?

No. It applies only when the value cannot be determined by the earlier valuation rules. For services, the supplier may opt for the residual rule instead and ignore the cost rule.