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CA Final · Indirect Tax Laws · Time of Supply

Ganga Logistics Ltd. issued an invoice for a taxable service on 10 April and received the full consideration on 30 June. Because of the delay, it charged Rs 5,000 as interest on delayed payment, debited it to the customer's account on 30 June and finally received the interest amount on 15 July. What is the time of supply of the interest component?

The time of supply of the interest is 15 July. For an addition to value by way of interest, late fee or penalty for delayed payment, the time of supply is the date on which the supplier actually receives that addition, regardless of the original invoice date.

  1. A10 April, the date of the original invoice
  2. B30 June, the date the interest was charged and the consideration received
  3. C15 July, the date on which the supplier receives the interestCorrect
  4. DThe date of provision of the service

Explanation

For services, the time of supply of any addition to value by way of interest, late fee or penalty for delayed payment is the date on which the supplier receives that addition. The interest was received on 15 July. The earlier invoice date and the date of debiting the interest do not govern this addition.

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