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CA Final · Indirect Tax Laws · Time of Supply

Meera Legal LLP, a law firm in Mumbai, receives legal services from Nordic Advisory AB, an associated enterprise located outside India, and the recipient is liable to pay tax under reverse charge. The foreign associate issued an invoice on 1 July. Meera Legal LLP entered the service in its books on 20 August and paid the fee on 15 September. Under section 13(3) and its second proviso, what is the time of supply?

The time of supply is 20 August. For services from an associated enterprise located outside India under reverse charge, the second proviso to section 13(3) fixes the time of supply at the earlier of the recipient's book entry date and the payment date, overriding the sixty-day rule.

  1. A1 July, the date of invoice
  2. B30 August, the date following sixty days from invoice date
  3. C20 August, the date of entry in the books of accountCorrect
  4. D15 September, the date of payment

Explanation

The second proviso to section 13(3) says that for supply by associated enterprises where the supplier is located outside India, the time of supply is the date of entry in the recipient's books or the date of payment, whichever is earlier. Book entry is 20 August and payment is 15 September, so 20 August is earlier. The sixty-day rule would give 31 August (the day following sixty days from 1 July), which is not applicable here; it is not 30 August in any case.

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