Time of Supply of Goods under GST Explained

Time of Supply is an important concept under the Goods and Service Tax (GST) regime. It refers to the point in time when the liability to pay GST arises. In simple terms, it is the date on which a transaction is deemed to have occurred for the purpose of tax payment. In this article, we will explain the Time of Supply of Goods under GST in detail and also discuss the situations when the time of supply cannot be determined.

Time of Supply of Goods under GST

As per section 12 of the CGST Act, 2017, the time of supply of goods shall be the earlier of the following:

The date of issue of invoice by the supplier or the last date on which he is required to issue the invoice with respect to the supply, whichever is earlier
The date on which the supplier receives the payment with respect to the supply

Example: Mr. A supplies goods worth Rs. 10,000 to Mr. B on 1st June 2021. Mr. A issued the invoice on 5th June 2021 and received the payment on 10th June 2021. In this case, the time of supply will be 1st June 2021, as it is earlier than the date of issue of invoice and the date of receipt of payment.

Situations when time of supply cannot be determined

There are certain situations when the time of supply of goods cannot be determined. These situations are as follows:

1. Continuous supply of goods

When the supply of goods is on a continuous basis and the invoice is issued periodically, then the time of supply shall be:

The date of receipt of payment with respect to each such invoice where the due date of payment is ascertainable from the contract
The date of issue of invoice or the date of receipt of payment, whichever is earlier, where the due date of payment is not ascertainable from the contract

Example: Mr. C enters into a contract with Mr. D to supply goods worth Rs. 1,00,000 per month for a period of 6 months. The invoice will be issued at the end of each month. In this case, the time of supply for each invoice will be the date on which the invoice is issued, as the due date of payment is not ascertainable from the contract.

2. Goods sent on approval basis

When the goods are sent on an approval basis and the recipient has not taken any decision within a specified period, then the time of supply shall be:

The date on which the recipient takes the goods or the date immediately following the period of 6 months from the date of removal, whichever is earlier

Example: Mr. E sends goods worth Rs. 50,000 to Mr. F on approval basis on 1st January 2021. Mr. F does not take any decision on the goods within the specified period. In this case, the time of supply will be 1st July 2021, as it is the date immediately following the period of 6 months from the date of removal.

3. Goods sent on sale or return basis

When the goods are sent on a sale or return basis and the recipient does not return the goods within a specified period, then the time of supply shall be:

The date on which the recipient informs the supplier about the acceptance of goods or the date immediately following the period of 6 months from the date of removal, whichever is earlier

Example: Mr. G sends goods worth Rs. 75,000 to Mr. H on sale or return basis on 1st February 2021. Mr. H does not return the goods within the specified period. In this case, the time of supply will be 1st August 2021, as it is the date immediately following the period of 6 months from the date of removal.

4. Time of supply cannot be determined

When the time of supply cannot be determined as per the above rules, then the time of supply shall be:

The date on which the recipient receives the goods or the date immediately following the period of 6 months from the date of removal, whichever is earlier, in case where a taxable person, other than a person paying tax under composition scheme, supplies any goods and the tax is paid on reverse charge basis by the recipient

Example: Mr. I supplies goods worth Rs. 20,000 to Mr. J on 1st March 2021. The tax is paid on reverse charge basis by Mr. J. In this case, the time of supply will be 1st March 2021, as the time of supply cannot be determined as per the above rules.

Conclusion

The Time of Supply of Goods under GST is an important concept that every business owner must be aware of. It is the date on which the liability to pay GST arises. In certain situations, the time of supply cannot be determined as per the rules laid down in the CGST Act, 2017. In such cases, the time of supply shall be determined as per the rules mentioned in this article. It is important for businesses to maintain proper records and comply with the GST regulations to avoid penalties and fines.