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CA Final · Indirect Tax Laws · Supply under GST

Mehta Machines Ltd issued an invoice on 1 April for Rs 4,00,000 of goods. It received an advance of Rs 1,50,000 on 20 March, credited to its bank on 22 March but entered in books on 21 March. Mehta's invoice due date under section 31 is 1 April. Further, the buyer paid interest of Rs 8,000 for delayed payment on 15 May. Which statement is correct under section 12 of the CGST Act, 2017?

The time of supply is 21 March for the Rs 1,50,000 advance, 1 April for the balance Rs 2,50,000, and 15 May for the interest, because payment date is the earlier of book entry or bank credit and interest is taxed when received.

  1. ATime of supply for Rs 1,50,000 is 22 March, and for Rs 2,50,000 is 1 April
  2. BTime of supply for the entire Rs 4,00,000 is 1 April
  3. CTime of supply for Rs 1,50,000 is 21 March, for Rs 2,50,000 is 1 April, and for interest is 15 MayCorrect
  4. DTime of supply for Rs 1,50,000 is 21 March, for Rs 2,50,000 is 1 April, and for interest is 1 April

Explanation

Under section 12(2) and Explanation 2, payment date is the earlier of book entry (21 March) or bank credit (22 March), so 21 March applies to Rs 1,50,000 as supply is deemed made to the extent of payment (Explanation 1). The balance Rs 2,50,000 is covered by invoice on 1 April. Under section 12(6) interest for delayed payment has time of supply on the date the supplier receives it, 15 May.

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