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

Kaveri Textiles Ltd supplies goods to a buyer under an agreement that carries interest at 18% per annum on delayed payment. The buyer pays the invoice value on 10 July, but pays Rs 4,500 of interest for the delay only on 25 August. The time of supply for the interest component of Rs 4,500 under the CGST Act is:

The time of supply for the interest is 25 August, when the supplier receives it. The Act specifically provides that an addition to value by way of interest, late fee or penalty for delayed payment is taxable on the date the supplier receives that addition.

  1. A10 July, the date on which the invoice value was paid
  2. BThe date of the original invoice
  3. C25 August, the date on which the supplier receives the interestCorrect
  4. DThe date on which the supplier files the next periodical return

Explanation

Section 12(6) says the time of supply for an addition in 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 25 August. Linking it to the invoice or payment date ignores this specific rule.

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