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CA Intermediate · Taxation · Time of Supply

Vedant Consultants, Mumbai, provides consulting services to Zenith Ltd. The invoice for Rs 5,00,000 was issued on 20 July, and the service was completed on 25 July. Zenith Ltd paid Rs 2,00,000 on 10 July as an advance and Rs 3,00,000 on 5 August. The invoice was issued within the prescribed period of 30 days from the date of supply of service. Which statement is correct about the time of supply for the services under forward charge?

Time of supply is 10 July for the Rs 2,00,000 advance and 20 July for the remaining Rs 3,00,000. For services invoiced within 30 days, it is the earlier of invoice or payment date, applied to each portion separately. Completion date of service is not used in this case.

  1. ATime of supply is 10 July for Rs 2,00,000 and 20 July for Rs 3,00,000Correct
  2. BTime of supply is 10 July for Rs 2,00,000 and 25 July for Rs 3,00,000
  3. CTime of supply is 20 July for the whole Rs 5,00,000
  4. DTime of supply is 25 July for Rs 5,00,000 and 5 August for nothing

Explanation

For services, if the invoice is issued within 30 days of supply, the time of supply is the earlier of invoice date or payment date. The advance of Rs 2,00,000 was received on 10 July, which is before the invoice, so that portion is taxed on 10 July. For the balance Rs 3,00,000, the invoice date of 20 July is earlier than payment on 5 August, so 20 July applies. Option B wrongly uses the completion date.

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