Goods and Services Tax (GST) and Corporate Tax Planning · Time of Supply

Time of Supply of Goods under Forward Charge: Section 12(2)

Updated 11 October 2026 · Fact-checked

Under Section 12(2) of the CGST Act, the time of supply of goods under forward charge is the earlier of two dates: the date of invoice, or the last date by which the invoice must be issued, and the date the supplier receives payment. Apply it separately to each invoice or payment, to the extent it covers.

Understand Time of Supply of Goods under Forward Charge

Time of supply tells you when the liability to pay GST arises. It fixes the tax period in which the supplier must show the supply in the return and pay the tax. Section 12(1) says the liability on goods arises at the time of supply, worked out under Section 12.

Under forward charge, the supplier pays the tax. Section 12(2) gives two triggers. The first is the date of issue of the invoice, or the last date on which the supplier is required to issue it under Section 31, whichever applies. The second is the date the supplier receives payment. The time of supply is the earlier of the two.

Why two triggers? The law does not let a supplier delay tax by delaying the invoice. If the invoice is late, the last date for issuing it still counts. If money arrives early as an advance, tax falls due on that date.

Two explanations matter. First, supply is treated as made only to the extent covered by the invoice or the payment. So a part advance creates a time of supply only for that part. Second, the date of receipt of payment is the date the payment is entered in the supplier's books or the date it is credited to the bank account, whichever is earlier.

There is also a small relief. If the supplier receives up to ₹1,000 in excess of the amount shown in the tax invoice, then for that excess the supplier may choose the date of issue of the invoice for it as the time of supply.

Key rules to remember

Basic rule, Section 12(2): Time of supply = earlier of (date of invoice or last date to issue invoice) and (date of receipt of payment); Applies to supply of goods where the supplier pays tax (forward charge).
Date of receipt of payment: Earlier of (date entered in books of supplier) and (date credited to supplier's bank account); Explanation 2 to Section 12(2).
Extent rule: Supply is deemed made only to the extent covered by the invoice or the payment; Explanation 1. Part payment fixes the time of supply for that part only.
Excess up to ₹1,000: Excess received up to ₹1,000 over the invoice amount: time of supply of the excess = date of invoice for the excess, at the supplier's option; Proviso to Section 12(2). It does not apply to excess above ₹1,000.
Interest, late fee, penalty: Time of supply of such addition = date the supplier receives it; Section 12(6).

How to solve Time of Supply of Goods under Forward Charge questions

Use this order for any question asking when GST is payable on goods supplied by a registered supplier under forward charge.

1Confirm the supply is of goods and tax is payable by the supplier, not the recipient. If reverse charge applies, Section 12(3) governs instead.
2List every date given: invoice date, date goods were removed or delivered, payment received, bank credit, book entry.
3Fix the invoice trigger. If the invoice was issued, use that date. If it was not issued or issued late, use the last date by which it should have been issued under Section 31.
4Fix the payment trigger. Take the earlier of the date the payment was entered in the books and the date it was credited to the bank.
5Compare the two triggers and pick the earlier date.
6Apply the extent rule. Work out the time of supply separately for each invoice or each part payment.
7Check the ₹1,000 excess proviso if the supplier received slightly more than the invoice value.
8State the conclusion: the date, the month in which the supplier reports the supply and pays tax, and the reason.

Quickest way: Two-date comparison

When to use it: Use when the question gives clear dates and asks only for the time of supply.

Write date A: invoice date, or the due date for the invoice if no invoice is issued in time.
Write date B: earlier of book entry and bank credit for the payment.
The answer is the earlier of A and B.
If there are several payments or invoices, repeat for each part and show the amount covered.
Write one line citing Section 12(2) and the extent rule.

Common mistakes in Time of Supply of Goods under Forward Charge

Using the date of delivery of goods as the time of supply.
Students carry over the old idea that tax follows the physical movement of goods.
Fix: Under Section 12(2) only the invoice date, the last date for the invoice, and the payment date count. Delivery matters only because Section 31 uses it to fix the last date for the invoice.
Taking the payment date as the bank credit date every time.
Students forget Explanation 2.
Fix: Take the earlier of the date of entry in the books and the date of credit in the bank account.
Choosing the later of the two dates.
Students think tax should arise only when both invoice and payment have happened.
Fix: The rule says earlier. Advance receipts trigger tax even before any invoice.
Treating a part advance as fixing the time of supply for the whole supply.
Students ignore the extent rule.
Fix: Fix the time of supply only for the portion covered by the payment or invoice. Deal with the rest by its own invoice or payment.
Ignoring a late invoice and using the actual invoice date.
Students see an invoice date in the facts and stop there.
Fix: If the invoice was issued after the Section 31 due date and no earlier payment came, the due date is the trigger, not the actual invoice date.
Applying the ₹1,000 excess option to any excess amount.
Students remember the limit loosely.
Fix: It covers an excess received of up to ₹1,000 over the invoice value, and it is the supplier's option.

Worked examples

Example 1

Sharma Traders, a registered supplier, sells machine parts to Kaveri Industries for ₹4,00,000 (excluding tax). The invoice is issued on 12 August and the last date for issuing it under Section 31 was 15 August. Kaveri pays an advance of ₹1,00,000 on 5 August, credited to Sharma's bank on 6 August and entered in its books on 7 August. The balance is paid on 20 August. Find the time of supply.

Show the solution

Forward charge applies, so Section 12(2) governs.
Advance of ₹1,00,000: the payment date is the earlier of 7 August (books) and 6 August (bank), which is 6 August.
The invoice date for the whole supply is 12 August, earlier than the last date of 15 August, so 12 August is the invoice trigger.
For the ₹1,00,000 covered by the advance, compare 6 August (payment) and 12 August (invoice). The earlier is 6 August.
For the balance of ₹3,00,000, the payment came on 20 August. Compare it with the invoice date of 12 August. The earlier is 12 August.

Answer: Time of supply is 6 August for ₹1,00,000 and 12 August for the remaining ₹3,00,000.

Example 2

Mehta Steel Ltd. supplies goods worth ₹2,50,000 to a buyer. The goods are removed on 10 March and the invoice should have been issued by 10 March under Section 31, but it is actually issued on 18 March. The buyer pays the full amount on 14 March, and it is credited to the bank and entered in the books on the same day. Find the time of supply and say what changes if the payment had come on 25 March.

Show the solution

Forward charge applies, so Section 12(2) governs.
Invoice trigger: the invoice was not issued by the due date, so the last date for issuing it, 10 March, is used.
Payment trigger: 14 March, as the bank credit and book entry fall on the same day.
Compare 10 March and 14 March. The earlier is 10 March.
If payment came on 25 March, compare 10 March with 25 March. The earlier is still 10 March.

Answer: The time of supply is 10 March, the last date for issuing the invoice. It stays 10 March even if payment is received on 25 March.

Exam tips

Write the section number and the rule in one line first, then apply the dates. Examiners reward the provision, analysis and conclusion order.
Underline every date in the question and label each one: invoice, due date, book entry, bank credit, delivery.
Always say which trigger was earlier and why. A bare date earns little.
Check for part payments or multiple invoices. Show the time of supply separately for each part.
Confirm the supply is under forward charge before using Section 12(2). If the recipient pays tax, switch to Section 12(3).

Practice questions from Time of Supply

Time of Supply of Goods under Forward Charge in other exams

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

Time of Supply of Goods under Forward Charge: frequently asked questions

What is the time of supply of goods under Section 12(2)?

It is the earlier of the date of issue of the invoice, or the last date for issuing it under Section 31, and the date the supplier receives payment. This applies when the supplier pays the tax.

Does an advance payment trigger GST on goods?

Yes. If payment is received before the invoice date or the invoice due date, the payment date is earlier and becomes the time of supply, to the extent of the amount received.

How is the date of receipt of payment decided?

It is the date the payment is entered in the supplier's books or the date it is credited to the supplier's bank account, whichever is earlier.

What is the ₹1,000 excess proviso?

If the supplier receives up to ₹1,000 more than the amount in the tax invoice, the supplier may choose the date of issue of the invoice for that excess as the time of supply of the excess.