Time of Supply under GST: Meaning and Scope

Understand Time of Supply: Meaning and Scope

Key rules to remember

Forward charge: goods

Time of supply = earlier of (a) date of invoice issue, or last date by which invoice must be issued under Section 31, and (b) date supplier receives payment

Section 12(2). Pick the earlier date. Applies to the extent of the invoice or payment.

Date of receiving payment

Date of payment = earlier of (date entered in supplier's books) and (date credited to supplier's bank account)

Explanation 2 to Section 12(2).

Excess payment up to ₹1,000

Excess received up to ₹1,000 over the invoice amount: time of supply for that excess = date of invoice for it, at supplier's option

Proviso to Section 12(2). Applies only to the excess, and only up to one thousand rupees.

Reverse charge: goods

Time of supply = earliest of (a) date of receipt of goods, (b) date of payment (earlier of books entry and bank debit), (c) day after 30 days from the supplier's invoice date

Section 12(3). If none can be determined, the date of entry in recipient's books.

Vouchers

Date of issue if supply is identifiable then; otherwise date of redemption

Section 12(4).

Residual rule

Periodical return case: due date of return; any other case: date tax is paid

Section 12(5). Only where sub-sections (2), (3) or (4) cannot fix the date.

Interest, late fee, penalty

Time of supply of the addition in value = date supplier receives it

Section 12(6).

How to solve Time of Supply: Meaning and Scope questions

1. 1Identify whether the supply is under forward charge, reverse charge, a voucher, or none of these. This picks the sub-section.
2. 2List every date in the facts: contract, advance, invoice, dispatch, receipt of goods, payment, bank credit, books entry.
3. 3For payment dates, take the earlier of the books entry and the bank credit (supplier), or the books entry and bank debit (recipient under reverse charge).
4. 4Apply the rule: earlier of invoice date (or last date to invoice) and payment date for forward charge; earliest of the three dates for reverse charge.
5. 5Apply 'to the extent' for part invoices or part payments, and test the ₹1,000 excess proviso if an excess amount is mentioned.
6. 6If the main rules cannot fix a date, use Section 12(5). Treat interest, late fee or penalty under Section 12(6).
7. 7State the conclusion: the time of supply and the tax period in which the tax is due.

Quickest way: Earliest-date shortcut

Common mistakes in Time of Supply: Meaning and Scope

• Taking the date of delivery or contract as the time of supply under forward charge

  Students think liability arises when goods move or the deal is made.

  Fix: Under Section 12(2) only the invoice date (or last date to issue it) and the payment date count. Pick the earlier.

• Taking the later of invoice and payment date

  Students link tax to completion of the transaction.

  Fix: The rule says earlier. Underline the word in the text before answering.

• Ignoring the last date to issue invoice when the invoice is late

  Students use the actual invoice date only.

  Fix: Clause (a) says the invoice date or the last date required to issue it under Section 31. Check which is relevant.

• Treating the bank credit date as payment date even when the books entry is earlier

  Students assume money in the bank is the only proof.

  Fix: Explanation 2: the earlier of the books entry and bank credit is the date of payment.

• Applying the whole invoice value on a part payment

  Students forget that supply is deemed made only to the extent covered.

  Fix: Under Explanation 1, split the supply into the part covered by payment and the part covered by invoice.

• Using the ₹1,000 proviso for any excess amount

  Students remember the figure but not its limit.

  Fix: It covers excess received up to ₹1,000 over the invoice amount, and the supplier may choose invoice date for that excess.

Worked examples