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CA Final · Indirect Tax Laws · Time of Supply

Vardhan Traders, Pune, supplies taxable goods to Kaveri Retail. The invoice for Rs 2,00,000 is issued on 10 June. On 5 June, Vardhan received an advance of Rs 50,000, which was credited to its bank on 6 June but entered in its books on 5 June. Under section 12(2) of the CGST Act, what is the time of supply for the Rs 50,000 portion?

The time of supply for the Rs 50,000 portion is 5 June. Section 12 takes the earlier of the invoice date and the payment receipt date, and receipt is the earlier of the book entry date and the bank credit date. Both fall before the invoice date, and 5 June is earliest.

  1. A5 June, the date the payment was entered in books, being earlier than the bank credit dateCorrect
  2. B6 June, the date of bank credit
  3. C10 June, the date of the invoice
  4. DThe date of delivery of the goods

Explanation

Under section 12(2), the time of supply is the earlier of the invoice date (or last date for issuing it) and the date of receipt of payment. Explanation 2 treats the payment date as the earlier of the book entry date and the bank credit date. Here that is 5 June, which is earlier than the invoice date of 10 June. Supply is deemed made to the extent covered by the payment, so the Rs 50,000 portion is taxed on 5 June. The 6 June option ignores the 'whichever is earlier' rule.

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