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CA Intermediate · Taxation · Time of Supply

Gupta Textiles, Surat, supplies goods to a customer. It collected an advance of Rs 1,00,000 on 5 March against an order of goods worth Rs 3,00,000. Goods were removed on 20 March with an invoice for Rs 3,00,000 issued the same day. The balance was received on 10 April. Under Section 12 of the CGST Act, 2017 as applicable to goods, what is the time of supply for the Rs 1,00,000?

The time of supply is 20 March, the invoice and removal date. Advances received for supplies of goods do not attract tax at the time of receipt, so the 5 March receipt does not fix the time of supply.

  1. A20 March, since the invoice was issued on this dateCorrect
  2. B10 April, the date of the full payment
  3. C5 March, when the advance was received
  4. DThere is no time of supply on an advance for goods; tax is payable only on removal of goods

Explanation

For goods, advance payment received before supply does not trigger tax liability, since the time of supply is the earlier of invoice date or payment date only for the supply of goods and, by exemption of advances for goods (Notification 66/2017-CT), tax is not payable on advances. Here, the invoice is issued on 20 March, and time of supply is determined with reference to the invoice/due date. So the time of supply for the whole Rs 3,00,000 including the advance is 20 March. The advance receipt date of 5 March is wrong as it applies only to services.

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