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CA Final · Indirect Tax Laws · Time of Supply

Sagar Foods Ltd, Surat, issued a tax invoice on 8 August for Rs 2,00,000 for supply of goods. On 20 August it received Rs 2,00,800 from the buyer, and the excess of Rs 800 was not covered by any other invoice. Sagar exercises the option available under the proviso to section 12(2). What is the time of supply for the excess Rs 800?

The time of supply for the excess Rs 800 is the date of issue of invoice in respect of that excess amount. The proviso lets a supplier receiving up to Rs 1,000 above the invoiced value choose this treatment instead of taxing the excess on the date of receipt.

  1. A8 August, because the whole supply is covered by the original invoice
  2. B20 August, being the date of receipt of the excess payment, always
  3. CThe date of issue of invoice in respect of the excess amountCorrect
  4. DThe date on which the periodical return for August is filed

Explanation

The proviso allows a supplier receiving up to Rs 1,000 in excess of the invoiced amount to treat the time of supply for the excess as the date of issue of invoice for that excess. Rs 800 is within the limit and the option is exercised. Option B reflects the default rule without the option, so it is wrong here. Explanation 1 limits supply to the extent covered by invoice or payment, so 8 August does not cover the excess.

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