Chapter 4

Time of Supply
Sections Rules
12. Time of supply of goods 47. Time limit for issuing tax invoice
13. Time of supply of services
14. Change in rate of tax in respect of
supply of goods or services

Statutory Provisions
12. Time of supply of goods
(1) The liability to pay tax on goods shall arise at the time of supply, as determined in
accordance with the provisions of this section.
(2) The time of supply of goods shall be the earlier of the following dates, namely: —
(a) the date of issue of invoice by the supplier or the last date on which he is
required, under 1[sub-section (1) of] section 31, to issue the invoice with
respect to the supply; or
(b) the date on which the supplier receives the payment with respect to the supply:
Provided that where the supplier of taxable goods receives an amount up to one
thousand rupees in excess of the amount indicated in the tax invoice, the time of
supply to the extent of such excess amount shall, at the option of the said supplier,
be the date of issue of invoice in respect of such excess amount.
Explanation 1.––For the purposes of clauses (a) and (b), “supply” shall be deemed to
have been made to the extent it is covered by the invoice or, as the case may be, the
payment.
Explanation 2.––For the purposes of clause (b), “the date on which the supplier
receives the payment” shall be the date on which the payment is entered in his books
of account or the date on which the payment is credited to his bank account,
whichever is earlier.
(3) In case of supplies in respect of which tax is paid or liable to be paid on reverse
charge basis, the time of supply shall be the earliest of the following dates, namely:—
(a) the date of the receipt of goods; or
(b) the date of payment as entered in the books of account of the recipient or the
date on which the payment is debited in his bank account, whichever is earlier;
or

1 Omitted vide The Central Goods and Services Tax Amendment Act, 2018 w.e.f. 01.02.2019
Ch 4: Time of Supply Sec. 12-14 / Rule 47

(c) the date immediately following thirty days from the date of issue of invoice or
any other document, by whatever name called, in lieu thereof by the supplier:
Provided that where it is not possible to determine the time of supply under clause (a)
or clause (b) or clause (c), the time of supply shall be the date of entry in the books
of account of the recipient of supply.
(4) In case of supply of vouchers by a supplier, the time of supply shall be—
(a) the date of issue of voucher, if the supply is identifiable at that point; or
(b) the date of redemption of voucher, in all other cases.
(5) Where it is not possible to determine the time of supply under the provisions of sub-
section (2) or sub-section (3) or sub-section (4), the time of supply shall––
(a) in a case where a periodical return has to be filed, be the date on which such
return is to be filed; or
(b) in any other case, be the date on which the tax is paid.
(6) The time of supply to the extent it relates to an addition in the value of supply by way
of interest, late fee or penalty for delayed payment of any consideration shall be the
date on which the supplier receives such addition in value.

Relevant circulars, notifications, clarifications issued by Government

1. Notification No. 9/2017 – Central Tax dated 28.06.2017 Seeks to appoint 01.07.2017
as the date on which the provisions of Section 12 are effective.
2. Notification No. 66/2017 – Central Tax dated 15.11.2017 Seeks to exempt all
taxpayers from payment of tax on advances received in case of supply of goods (This
notification is issued superseding the earlier Notification No. 40/2017 – Central Tax
dated 13.10.2017 wherein the exemption from payment of tax on receipt of advances
was extended to a registered person whose aggregate turnover is less than ` 1.5
crores);
3. Notification No. 4/2017 – Central Tax (Rate) dated 28.06.2017 Specifies goods the
supply of which is liable to CGST under reverse charge mechanism;
4. Notification No. 8/2017 – Central Tax (Rate) dated 28.06.2017 Exemption from
payment of CGST under reverse charge for supplies where value do not exceed
` 5,000/-;
5. CBIC Circular No. 38/12/2018 dated 26.03.2018 clarify the levy of GST, time of supply
of goods and value of supply in case of goods sent for job-work.
6. CBIC Circular No. 22/22/2017-GST, dated 21-12-2017 clarify issues regarding
treatment of supply by an artist in various States and supply of goods by artists from
galleries
7. CBIC Circular No. 10/10/2017-GST, dated 18-10-2017 clarify issues wherein the
goods are moved within the State or from the State of registration to another State for
supply on approval basis.

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Related provisions of the Statute

Section or Rule Description
(CGST / SGST)
Section 2 (31) Definition of Consideration
Section 2 (41) Definition of Document
Section 2 (52) Definition of Goods
Section 2 (66) Definition of Tax Invoice or Invoice
Section 2 (93) Definition of Recipient
Section 2 (97) Definition of Return
Section 2 (98) Definition of Reverse Charge
Section 2 (105) Definition of Supplier
Section 2 (118) Definition of voucher
Section 7 Scope of Supply
Section 9 Levy and Collection
Section 14 Change in rate of tax in respect of supply of goods or services
Section 15 Value of taxable supply
Section 31 Tax invoice, credit note and debit note
Section 39 Furnishing of Returns
12.1 Analysis
(a) Introduction
Supply has been understood to hold the key to the incidence of GST, but it is the ‘time of
supply’ that dictates the occasion when this incidence will come to rest. Taxable supply has
been defined to mean a supply of goods and/or services which is chargeable to tax under this
Act. It is interesting to note the use of the expression ‘chargeable to tax’ as opposed to
‘leviable to tax’. It has been held that ‘chargeable to tax’ encompasses not only the incidence
of tax but also its assessment.
The opening words in section 12(1) are very interesting and forceful as it is here that the
liability to pay GST arises. The subject matter of levy – goods or services – becomes
encumbered with the tax upon occurrence of the taxable event – supply. But the tax levied in
terms of section 9, comes to reside only at the time determined by section 12 and 13.
Accordingly, these sections play a stellar role in the imposition of GST.
The provisions state that the time of supply “shall be” and as such is a “must” to be examined
closely. It signifies that “time of supply” is not a fact to be inquired by the taxable person but
one that is to be admitted as the time of supply appointed by the will of legislature as declared

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in the section. In order to not allow any opportunity for a suggestion by the taxable person or
even the tax administration as to any alternative to what could be the time of supply, the
legislature retains for itself the exclusive authority to appoint the time of supply by employing
the words “shall be”. Therefore, the time of supply is what is stated in the law to be the time of
supply and nothing else.
Invoice is commonly understood as ‘proof of sale’ but this common understanding is far from
the truth. Invoice is a document recording the terms of an arrangement already entered. Lease
agreement, as an analogy, is a document in present evidencing the agreement reached
between two parties is for the lease of property for certain duration in exchange for a certain
consideration. A lease arrangement verbally entered into previously when documented by an
indenture or deed does not bring into existence the lease when the document is prepared. In
fact, the document merely is a record of an arrangement of lease entered previously, albeit
verbally. Verbal arrangements are no less agreements in the eyes of law. Similarly, an invoice
does not bring into existence a sale agreement but merely records the terms of whatever
arrangement that may have been entered into by the parties, involving the subject matter. Tax
laws require the preparation of an invoice not as if the absence of an invoice defeats the levy
but prescribes an unambiguous occasion when the tax may become recoverable with a proper
record of the terms of the underlying arrangement. Therefore, an invoice can evidence not
only a sale but every other form of supply such as transfer, barter, exchange, license, rental,
lease or disposal. If issuance of an invoice is uncommon for barter or a rental arrangement,
then it is to do with our own unfamiliarity and nothing to do with its impermissibility.
(b) Time of Supply – Forward Charge
Time of supply is prescribed (legislative will) to be the earlier of (a) date of issue of invoice or
last date on which the invoice is required to be issued with respect to the supply and (b) date
of receipt of payment. Date of issue of invoice requires us to examine section 31 which deals
with the requirement to issue a “tax invoice”. Here two kinds of situations are contemplated,
namely:
(i) A case where the supply involves movement of goods
(ii) Any other case
Before proceeding, it is necessary to admit the concept of ‘person and taxable person’. Person
is defined in the most familiar manner in section 2(84) but taxable person is explained in detail
in section 25 (please refer to the relevant Chapter for a detailed discussion). A proper reading
of section 25 helps us understand – a State is the smallest registrable unit in GST – except
where multiple business units are registered separately under section 25. A taxable person is,
therefore, the presence of the person in a State where taxable supplies are made from in the
name of such person. When a person becomes liable to be registered in a State at any place
from where taxable supplies are made therein, such person shall be a taxable person.
Now, we may return to our discussion regarding the two kinds of cases that are discussed on
time of supply. It is noticeable that section 31 uses two expressions – ‘removal of goods’ and

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‘movement of goods’ – which are not merely expressions of distinction without a difference.
There is deliberate purpose for legislating in this manner. ‘Removal of goods’ is defined in
section 2(96) and identifies the steps that may follow once the decision to supply is made. But,
‘movement of goods’ is not defined and is, therefore, an attribute of the goods at the time of
supply.
Illustration 1: Machine tools on display at an exhibition in Mumbai agreed to be purchased by
executives of an engineering company from Indore attending the exhibition, is a case of
‘supply involving movement’ even though the transportation is undertaken by representatives
or the purchaser on their own.
Illustration 2: In illustration 1 above, if the executives from Indore were to place an order at the
same exhibition with instructions for delivery to be ensured by the exhibitor (supplier) assured
within six weeks, this would also be a case of ‘supply involving movement’ and the
transportation being organised by the supplier through an independent transport agency from
the factory or exhibitor site to the customer location.
It is for this reason that the language employed of seemingly similar or synonymous
expressions – ‘removal of goods’ and ‘movement of goods’ – but demands to be supplied their
separate and individual meanings and not be misled by their apparent similarity. To reiterate,
‘removal of goods’ is a question of fact to be examined from the steps that would ensue once
the supply is decided whereas ‘involves movement’ is a question of the state-of-affairs of the
goods being supplied.
Therefore, it is important even before the arrival of time of supply, that the goods to be
supplied be classified into one of these two cases, that is, whether it is a case of supply that
involves movement or one that does not involve movement of the goods. Only when this
classification of the goods has been clearly made, section 31 comes into operation.
Date of invoice
Any transaction where invoice is raised before the actual movement or removal or goods or
where the goods are made available to the buyer, in such cases, the date of raising invoice
shall be taken as time of supply. It is possible that in such cases the delivery is taken at a later
date by the buyer or is removed by the supplier at the instructions of the buyer at a date which
is later than the date of raising such invoice. In such cases, we need not consider the last
date of raising such invoice but we shall consider the actual date of invoice for determining the
time of supply. Such cases shall include the invoices raised on the last date of the month but
goods not dispatched and which are dispatched in next month.
Supply involves movement
Where the supply involves movement of goods then an invoice must be issued at the exact
time when the goods are about to be removed. So, it is pertinent to identify the moment when
the goods are considered to be getting removed. Section 2(96) defines removal in relation to
goods as:

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(a) Despatch of the goods for delivery by the supplier thereof or by any other person acting
on behalf of such supplier
(b) Collection of the goods by the recipient thereof or by any other person acting on behalf
of such recipient
As already explained above, movement of goods may be caused by the supplier (or his agent
or transporter) or by the recipient (or his agent or transporter). When the movement is caused
by the supplier, the point of removal will arise when the goods are despatched from the place
of business of the supplier. The word ‘despatch’ means ‘to send off’. So, just before the goods
are to be sent off, the invoice is required to be issued where the removal is by the supplier.
Illustration 3: Mr. X in Gujarat gets an order from Mr. Y in West Bengal on 18th March 2020 for
supply of refrigerators. Mr. X dispatches the goods from his premises to his transporter’s
premises on 20th March 2020. The transporter initiates the transportation on 22nd March 2020
and the goods finally reach the premises of Mr. Y on 26th March 2020. The removal of goods
will be said to be caused on 20th March 2020 i.e. the date when the goods leave the premises
of Mr. X. The last date of issue of invoice will also be 20th March 2020 in the given case.
Where the movement is by the recipient, the point of removal will arise when the goods are
collected by the recipient from the premises of the supplier. This collection may be by the
recipient or a person acting on his behalf as the agent or transporter or any other person. So,
the invoice is to be issued by the supplier just before the point when the recipient (or his agent
or transporter) collects the goods from his premises.
Illustration 4: Mr. X in Gujarat gets an order from Mr. Y in West Bengal on 18th March 2020 for
supply of refrigerators. Mr. Y’s transporter takes delivery of the said goods from the premises
of Mr. X on 21st March, 2020 and delivers them to Mr. Y on 26th March 2020. As Mr. Y’s
transporter collected the goods for transportation on 21st March 2020, the date of removal will
be considered as 21st March 2020. The last date of issue of invoice will also be 21st March
2020 in the given case.
Illustration 5: Mr. X’s manufacturing unit in Surat, Gujarat gets an order for supply of
refrigerators from Mr. Y in West Bengal on 18th March 2020. It was agreed that Mr. Y’s
transporter will collect the goods from Mr. X’s depot in Vadodara which is registered as an
additional place of business under the same GSTIN as that of Surat. Mr. X removes the goods
from his manufacturing unit to his depot on 20th March, 2020 which reaches the depot on 21st
March 2020. Mr. Y’s transporter collects these goods on 23rd March 2020 and the said goods
reach Mr. Y on 28th March 2020. In this illustration, the movement of goods by the supplier
between his premises cannot be called as a dispatch as it is not for delivery by the supplier. In
fact, the first leg of the activity occurring between the units of Mr. X does not entail raising of
invoice as it is not a supply. The removal of goods for supply to Mr. Y will arise only when the
goods are collected by the transporter of Mr. Y from Vadodara i.e. 23rd March 2020 which will
also be the last date of issue of invoice as per Section 31.

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Supply does not involve movement

Where the supply involves movement of goods then an invoice must be issued on or before
the time when the goods are about to be removed. Where the supply does not involve
movement of goods then an invoice must be issued on or before the time when the goods are
delivered or made available to the recipient. It is in this case – where supply does not involve
movement – that the complexity remains even after making a proper classification. That is,
determining the time when the goods are delivered or made available to the recipient. Delivery
– the mode and the time – is the unilateral choice of the recipient and the supplier has no
authority to decide ‘how’ and ‘when’ he will deliver the goods to the recipient. It only becomes
easy in a contract for supply if it clearly records this ‘choice’ of the recipient regarding the
mode and time of delivery. The supplier is always duty-bound to deliver in exactly the same
way – manner and timing – which the recipient dictates. In fact, the supplier continues to be
obligated until delivery is completed in the way it is stated by the recipient. In other words,
delivery is not complete if there is any deviation in either the manner or the timing compared
to that dictated by the recipient. When the delivery is to the satisfaction of the recipient, then
the supplier is released from his obligation. Therefore, in all those cases (where supply does
not involve movement) the additional question of fact to be determined is the mode and time
of delivery dictated by the recipient and whether the same has been complied with, to the
satisfaction of the recipient. It is now that section 31 comes into operation.
Illustration 6: Mr. X agrees to sell his godown in Gujarat to Mr. Y on 18th March 2018. There is
a separate agreement entered by Mr. X and Mr. Y for the selling of furniture within the godown
on 19th March 2018. Mr. X hands over the possession of the godown and the furniture on 25th
March 2018. In this case, the furniture will be considered to be delivered on 25th March 2018
which will also be the last date of issue of invoice as per Section 31.
Continuous supply of goods
As per Section 2(32) of the CGST Act 2017, continuous supply of goods means a supply of
goods which is provided or agreed to be provided continuously or on recurrent basis, under a
contract whether or not by means of wire, cable, pipeline or other conduit and for which the
supplier invoices the recipient on a regular or periodic basis and includes supply of such
goods as the Government may subject to such conditions as it may by notification specify.
From the above definition, it may be inferred that there are two important conditions to be
satisfied for a supply to be called as continuous supply of goods:
(a) The supply of goods should be provided on a continuous or recurrent basis
(b) The supplier should be invoicing the recipient on a regular or periodic basis
Once, these two conditions are satisfied, any supply will be considered as continuous supply
of goods. While continuous supply shall mean a supply of goods incessantly for eg., supply of
lubricating oil through pipeline, a recurring supply shall mean a supply which has a pattern of
reoccurrence for eg., supply of thirty water jars every day in an office. For the purpose of

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continuous supply, it is necessary that successive statement of accounts or successive

payments or both are involved for the purpose of determining the consideration for such
supply. As per Section 31, in respect of continuous supply of goods, it has been stated that
invoice should be issued before or at the time each such statement is issued or each such
payment is received. Please note that the payment referred to in the Section relates to the
payment as per the contract and will not relate to any adhoc advance or any other payment
received out of the terms of the agreement for continuous supply. Please also note that
regularity of supply does not always imply continuous supply. Maybe each supply is complete
but there is a delay in billing. That cannot become continuous supply. There must be
something contingent at the time of removal / movement that can only be determined after
arrival or even consumption. Deliberate delay in invoice for regular supplies does not
automatically result in continuous supply. If the billing cycle coincides with tax period, there
may not be much consequence of regarding such transactions to be supply as tax does get
paid timely. But, if the billing cycle is contractually longer than tax period, then care must be
taken to correctly categorize as continuous supply.
Please note that ‘payment’ as a criterion used in the context of continuous supply CANNOT be
applied where consideration is in ‘non-monetary form’ such as barter or exchange
transactions. In such cases, where consideration is in non-monetary form and involve
continuous supply, experts hold the view that the payment criterion falls apart and time of
supply would need to be determined based on ‘actual supply or invoice’.
Goods sent or taken on approval for sale or return basis
As per this system, certain goods are sent to the recipient without supplying/selling the same
at its outset. These goods can be examined or tested by the recipient as to whether his
requirements are fulfilled. The recipient can at his behest, approve the said supply or return
the said goods. If the goods are returned, no supply will be deemed to have taken place. If the
goods are approved by the recipient, then it will amount to a supply. The last date of issuance
of invoice in such cases as per Section 31(7) of the CGST Act 2017 has been given as earlier
of:
(a) Before or at the time of supply
(b) Six months from the date of removal
Here, time of supply refers to the time when the confirmation is given by the recipient that he
is willing to accept the goods. The last date of issuance of invoice in such cases will be the
confirmation of acceptance subject to the fact that this acceptance should not take place after
six months from the date of removal. If the approval does not come within the time frame of six
months/comes after the period of six months from the date of removal, then the last date of
invoice arises on the date when this period of six months from the date of removal expires.
In this regard, vide CBIC Circular No. 22/22/2017-GST, dated 21-12-2017, it has been clarified
by CBIC that the movement of artwork from artist to art galleries shall not be constituted as

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supply as the same is sent on approval basis and the supply takes place when buyer selects a
particular art work displayed at the gallery. This Circular needs further clarification because in
case the goods are not sold within six months from the date of removal, the invoice is required
to be issued after such time to Gallery for supply of such artwork. Accordingly, there is a
presumption of supply from the artist to the gallery inherent in this example. On the contrary,
if the gallery is not accepting the goods on approval but for display, the above clarification
shall not hold true and as gallery is acting as an agent for display and supply of goods on
behalf of the artist. In such cases, experts feel that an invoice be issued by the artist to the
gallery while moving the goods to the gallery and gallery shall issue an invoice at the time of
sale to the buyer. Further, valuation benefits as available under Rule 28 of the CGST Rules
may be availed by the artist while supplying such paintings to the gallery.
Also, vide CBIC Circular No. 10/10/2017-GST, dated 18-10-2017 it has been clarified that
where goods are moved within the State or from the State of registration to another State for
supply on approval basis i.e. such goods are to be considered as being carried on approval
basis and a tax invoice can be issued when the buyer has approved the goods and taken the
delivery.
Unlike the case of VAT law where an invoice is required to be issued when ‘transfer of
property’ takes place and invoice does not have to be kept pending until they are physically
removed, GST requires issuance of an invoice at the time of their ‘removal’ or ‘delivery’, as the
case may be, notwithstanding any delay in transfer of property. As explained earlier, an
invoice does not by itself prove anything except that it is a record of the terms of
understanding of the underlying transaction. Accordingly, referring back to our brief mention
about ‘person and taxable person’, the tests requiring examination under section 31 must be
administered not only in a transaction between two persons but even on all the transactions
between two taxable persons even if they belong to the same person.
It is only upon undertaking a detailed enquiry into the questions of fact determined under
section 31 in the respective cases, we will be able to determine one of the two elements
prescribed to be the ‘time of supply’ under section 12. Time of supply therefore, is earlier of
date of invoice as per section 31 or date of receipt of payment with respect to the supply.
Exceptions:
(i) When an amount is received in excess of tax invoice up to `1,000/-, the time of supply
in respect of such excess at the option of the supplier shall be the date of such invoice.
(ii) Supply shall be deemed to have been made to the extent of the value of supply
indicated in the invoice or the value of payment received by the supplier.
(iii) Date of receipt of payment shall be the date on which the payment is accounted in the
books of the supplier or the date reflected in the bank account of the supplier,
whichever is earlier.
(iv) No Tax on receipt of payment: The registered person who did not opt for the
composition levy under section 10 shall pay the central tax on the outward supply of

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goods at the time of supply as specified in section 12(2)(a) i.e. the date of issue of
invoice by the supplier or the last date on which he is required, under section 31(1), to
issue the invoice with respect to the supply. Therefore, no GST is payable on advances
received against supply of goods. (NN-66/2017-Central Tax dated 15-Nov-17)). Earlier
by Notification No.40/2017- Central Tax dtd.13-Oct-17, this benefit was granted to only
small assesses whose turnover in the preceding financial year or in the year in which he
obtained registration does not exceed or is not likely to exceed `150 Lakhs. However
subsequently the scope was enhanced to include all registered persons making supply
of goods except the persons who have opted for composition under section 10. Please
note that the relaxation has been brought only for advance received for supply of goods
and is not available for advance received for supply of services. In summary, the
taxability of the consideration received in advance would be as follows:

Period Taxability of consideration received in advance for

supply of goods
Aggregate turnover less Aggregate turnover
than ` 1.5 crores more than ` 1.5 crores
01.07.2017 to 12.10.2017 Taxable Taxable
13.10.2017 to 15.11.2017 Not taxable Taxable
15.11.2017 and onwards Not taxable Not taxable

The above notifications also refer to the situations attracting the provisions of Section
14 (change in rate of tax in respect of supply of goods or services). Accordingly, the
date of receipt of advances would not be relevant for the purpose of ascertaining
appropriate rate of tax in case of change. In other words, the applicable rate of tax in
case of change in rate of tax would be ascertained based on the date of issuance of
invoice and date of supply of goods only.
(v) The provisions relating to job-work provides for supply of capital goods / inputs to the
job-worker without payment of tax (section 143). The intention of the law is not to tax
capital goods / inputs sent to job-worker as supply since in such an arrangement the
goods are received back by the principal. However, if such goods are not received back
within three years and one year respectively, it would qualify as supply by way of
operation of deeming fiction provided under section 143(2) and section 143(3). In such
a scenario, the date of sending the goods to the job-worker would be deemed to be the
date when the goods were sent to the job-worker originally. It is important to understand
here that the incidence of tax falls back on the date when the goods were sent to the
and the operation of deeming fiction dictates the date of supply of goods as the time of
supply. This would be in deviation to the general principles of ascertaining the time of
supply viz., date of removal of goods on which the principal ought to have issued the
invoice. In this regard, the Central Government has issued a Circular No. 38/12/2018

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dated 26.03.2018 wherein it is clarified that the principal should issue an invoice on
expiry of three years / one year and should declare such supplies in the return filed for
the month in which the time period of three years / one year is expired.
Illustration 9: Assuming the circumstances given under the illustrations 3, 4, 5 and 6, please
find the time of supply after considering the following additional information:
Actual date of issue of invoice Date of receipt of payment Amount received
21st March 2018 19th March 2018 5,00,000
25th March 2018 10,00,000
Answer: Since, the date of receipt of payment will be immaterial in considering the time of
supply of goods, the earlier of the two dates i.e. the last date of issue of invoice and actual
date of issue of invoice will be considered as the time of supply. So, the time of supply will be
as follows:
Illustrations Last date of issue of Actual date of issue Time of Supply
invoice of invoice
Illustration 3 20th March 2018 21st March 2018 20th March 2018
Illustration 4 21st March 2018 21st March 2018 21st March 2018
Illustration 5 23rd March 2018 21st March 2018 21st March 2018
Illustration 6 25th March 2018 21st March 2018 21st March 2018
Illustration 10: A cement manufacturing company generates certain waste materials which are
supplied to a recycling factory through a pipeline on a continuous basis.
(a) Situation 1: Monthly payments of ` 5,00,000 are to be made by 7th of the next month as
per the contract. For the period October – December, following were the date of
issuance of invoices and payments:
Period Date of issuance of invoice Date of receipt of payment
October 4th November 2018 6th November 2018
November 6th December 2018 8th December 2018
December 9th January 2019 5th January 2019
(b) Situation 2: Monthly statement of accounts are to be prepared by 5th of the next month
as per the contract. For the period October, following were the dates of issuance of the
successive statement of account and the date of issuance of invoices:
Period Date of issuance of invoice Date of issuance of the
statement of account
October 4th November 2018 6th November 2018
November 6th December 2018 3rd December 2018
December 9th January 2019 5th January 2019

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Answer:
Situation 1: Where there are successive payments involved, the last date of issuance of
invoice is the date of receipt of such payment. As per Section 12(2), the time of supply should
be the earlier of the date of issuance of invoice or the last date of issuance of the invoice. It
may be noted that as per Notification no. 66/2017-CT dated 15th November 2017, only these
two events are to be considered and the date of receipt of payment as mentioned under
Section 12(2)(b) may be ignored. The due date when the payment should be received is also
immaterial as it has not been specified in either the time of supply provisions or the provisions
of the last date of issuance of invoice. Thereby, the time of supply in the given case will be the
earlier of the date of receipt of successive payment (last date of issuance of invoice) or the
actual date of issuance of invoice.
Period Date of issuance of Date of receipt of Time of supply
invoice payment
October 4 November 2018
th 6 November 2018
th 4th November 2018
November 6th December 2018 8th December 2018 6th December 2018
December 9th January 2019 5th January 2019 5th January 2019
Situation 2: Where there are successive statements of accounts that are to be prepared, the
last date of issuance of invoice will be the date of issuance of such successive statement. As
per Section 12(2), the time of supply should be the earlier of the date of issuance of invoice or
the last date of issuance of the invoice. It may be noted that as per Notification no. 66/2017-
CT dated 15th November 2017, only these two events are to be considered and the date of
receipt of payment as mentioned under Section 12(2)(b) may be ignored. The due date when
the successive statement should be prepared is immaterial as it has not been specified in
either the time of supply provisions or the provisions of the last date of issuance of invoice.
Only the actual date of the preparation of the statement needs to be considered. Thereby, the
time of supply will be the earlier of the date of issuance of successive statement of account
(last date of issuance of invoice) and the date of invoice.
Period Date of issuance of Date of issuance of Time of supply
invoice the statement of
account
October 4th November 2018 6 November 2018
th 4th November 2018
November 6th December 2018 3rd December 2018 3rd December 2018
December 9th January 2019 5th January 2019 5th January 2019
Illustration 11: Certain goods are sent by Mr. X on sale on approval or return basis to Mr. Y on
22nd April 2019. The supply gets confirmed and invoice is issued on:
Case 1: 20th August 2019
Case 2: 22nd November 2019.
Payment in each of the cases is made on 23rd November 2019.

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Answer: Date of receipt of payment is immaterial for the purpose of calculating time of supply
u/s 12(2) of the CGST Act 2017. So, 23rd November 2019 should be ignored altogether. The
time of supply should be earlier of the date of issuance of invoice or the last date of issuance
of invoice. The last date of issuance of invoice will be the earlier of the confirmation of supply
or six months from the date of removal.
In case 1, the confirmation of supply occurred before 6 months from the date of removal. So,
the last date of issuance of invoice was 20th August 2019. On this date, the invoice was
issued. So, the time of supply will be 20th August 2019.
In case 2, the confirmation of supply happened after 6 months from the date of removal. Six
months expired on 21st October 2019. So, the invoice was required to be issued by this date.
Since the invoice was issued on 22nd November 2019, the actual date of issue of invoice will
be considered as falling after the last date of issuance of invoice. So, the time of supply will be
the last date of issuance of invoice i.e 21st October 2019.
(c) Time of Supply – Reverse Charge
Where tax is payable on reverse charge basis, the time of supply is appointed to be the
earliest of (a) date of receipt of goods, (b) date of payment or (c) 30 days from the date of
issue of invoice by the supplier. If for any reason, one of these three dates cannot be
determined then the time of supply will be the date of recording the supply in the books of the
recipient.
Keeping in mind the definition of reverse charge in section 2(98), the above provision does not
apply to payment of tax by an electronic commerce operator but only to those cases of supply
which fall under sub-section (3) or (4) of section 9 of the Act.
Reverse charge in case of goods may arise either under Section 9(3) or Section 9(4) of the
CGST Act. Section 9(3) empowers the issuance of notification by the Government under which
the tax will be paid by the recipient of goods as per reverse charge mechanism. Notification
No. 4/2017-Central Tax (Rate) dated 28.06.2017 as amended from time to time provides the
list of goods which will be subject to reverse charge mechanism subject to the category of
supplier and recipient specified therein. These goods include cashew nuts (not shelled or
peeled), bidi wrapper leaves (tendu), tobacco leaves, raw cotton, silk yarn, supply of lottery
etc. when supplied by specified persons.
Prior to enactment of CGST Amendment Act, section 9(4) required the recipient of taxable
goods/services to pay tax if it is registered and receives inward supplies from unregistered
suppliers. The applicability of which was exempted from 13th October 2017 till 31st January,
2019. However, it was applicable for intra state supplies subject to the aggregate amount of
such supplies exceeding ` 5000 in a day from any or all unregistered suppliers and all
interstate supplies without any limit till 12th October 2017. Section 9(4) has been Substituted
by the Central Goods and Services Tax (Amendment) Act, 2018, w.e.f. 1-2-2019. According
to the new provision, Government may, on the recommendations of the Council, by
notification, specify a class of registered persons who shall, in respect of supply of specified

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categories of goods or services or both received from an unregistered supplier, pay the tax on
reverse charge basis as the recipient of such supply of goods or services or both. In line,
there are certain services which are notified but no goods have been notified till 30.04.2020
under the newly substituted section.
It is also pertinent to mention that in view of bringing into effect the amendments (regarding
RCM on supplies by unregistered persons) in the GST Acts vide Notification No 01/2019-
Central Tax (Rate) ,dt. 29-01-2019, reverse charge exemption notification has been rescinded
Illustration 12: Mr.X, an agriculturist supplies raw cotton (under reverse charge) to Mr. Y who
manufactures cotton shirts. The date wise turnout of events are given below:
01.04.2019- Mr.Y approaches Mr.X and places an order for 2 tonnes of cotton
10.04.2019- Mr.Y receives the goods
15.04.2019- Mr.X issues an invoice
20.04.2019- Mr.Y makes a payment by cheque and accordingly records it in his books of
accounts.
25.04.2019- The payment gets debited from Mr.Y’ s bank account
What will be the time of supply in the given case?
Answer: The time of supply shall be the earlier of the following dates:
a. the date of receipt of goods i.e. 10.04.2019
b. the date of payment as recorded in the books of Mr.Y i.e. 20.04.2019 or the date when
the payment gets debited in the books of the recipient i.e. 25.04.2019 whichever is
earlier
c. the date immediately following thirty days from the date of issue of invoice, i.e.
15.04.2019+30days+1day=16.05.2019
Therefore, the time of supply will be 10.04.2019.
(d) Time of Supply – Vouchers
The Act introduces time of supply in respect of ‘vouchers’ as a separate category such that the
provisions relating to time of supply of goods is made inapplicable when the supply is of such
vouchers. Referring to Chapter III where in the context of supply, definition of goods has been
discussed at length, we find specific inclusion of ‘actionable claims’.
In relation to actionable claims, Courts have held as follows:
(i) Actionable claims come within the definition of goods as generally understood.
(ii) VAT laws have deliberately excluded actionable claims from the definition of goods.
(iii) Actionable claims represent debt and accordingly carry a demand that can lawfully be
made by one person against another.
(iv) Actionable claims represent property in non-physical (incorporeal) form.

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But in GST, unlike VAT laws, we find that by including actionable claims within the definition of
goods, they are made liable to tax. In relation to actionable claims under GST, please note the
following key aspects:
(i) Actionable claims are included specifically in the definition of goods, but this inclusion is
by creating “an exception from an exclusion”. In other words, while excluding money
and securities from the definition of goods, actionable claims have been singled out.
This means such forms of actionable claims that represent property in the form of
money or securities are also excluded from the definition of goods. Therefore, from a
large population of actionable claims, tax is applicable only on the subset of actionable
claims which do not represent property in the form of money or securities and all other
forms of actionable claims representing any other property is includable in the definition
of goods. A receipt for having made payment is not actionable claim because that
receipt represents money and not the result of a transaction resulting in debt or
demand. Similarly, promissory notes, IOU slips and all other derivatives of such
instruments are also not actionable claims for the purposes of GST because of the
exclusion of money from the definition.
(ii) Actionable claims which are included within the definition of goods do not become
includable in the definition of services due to the accommodative and expansive
language used to define services. For this reason, the property that actionable claims
represent even if they are in non-physical form will continue to remain goods and not
become services. Actionable claims so understood may or may not be itself in any
physical form. In other words, actionable claim is not the piece of paper carrying the
detailed description of the actionable claim in question but the real property, though in
non-physical form, that is referred to in that piece of paper. In this digital age, piece of
paper carrying the description of the actionable claim can even be present in electronic
form and still retain the chart of actionable claim within the definition of goods. So,
actionable claims can be in physical or electronic form as long as they represent real
property.
About ‘actionable claims’ discussion in Chapter III would have highlighted that the incidence is
limited to ‘lottery, betting and gambling’. Further, it is important to note that vouchers are not
always referring only to actionable claims. Vouchers being treated as a separate category for
the purposes of determining time of supply will need to be first identified in relation to supply
before applying the relevant provision regarding its time of supply. Vouchers are defined in the
Act as “an instrument where there is an obligation to accept it as consideration or part
consideration for a supply of goods or services or both and where the goods or services or
both to be supplied or the identities of their potential suppliers are either indicated on the
instrument itself or in related documentation, including the terms and conditions of use of such
instrument” and examples of voucher are coupon, token, ticket, license, permit, pass.
Now, the time of supply in the case of vouchers is stated to be:
(i) the date of issue of voucher if the supply is identifiable at that point; or
(ii) in all other instances, the date of redemption of the voucher.

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Please refer to the section 13 regarding time of supply of services for detailed discussion on
the overall aspect of vouchers.
Here, only the key aspects of the definition are discussed which may be referred back while
examining the scope of section 13(4).
Money 2(75) may be represented as follows:

Object Purpose
Indian legal tender * Foreign currency ** Used as consideration to:
Cheque, promissory note, bill of exchange, letter  settle an obligation or
of credit, draft, pay order, traveller cheque,  exchange with Indian legal tender
money order, postal or electronic remittance or of different denomination (not held
any other instrument recognized by RBI # for numismatic value)

* currency recognized by law – RBI Act, 1934 and includes currency notes and coins. Legal
tender issued records liability of the Central Government and a guarantee to its holder to
secure value-in-exchange
** legal tender of other countries recognized by India. Does not include securities
denominated in foreign currency
#stored value instrument known as Pre-Paid Instrument (PPI) issued by a licensee under
Payment and Settlement Systems Act, 2007

Money is therefore that which is ‘used as’ consideration between parties to a transaction.
Money does not represent a liability of the parties to the transaction. Money represents liability
of the Central Government. A person who has money has an asset which represents a certain
amount of value. There is requirement to specially prescribe ‘terms of use’ of money. It is
known and is declared by the law that recognizes money to be legal tender. Money includes
all ‘stored value’ instruments approved by RBI or PPIs. Value is stored in PPIs by transfer of
Indian legal tender in cash or from bank account and any balance of stored value in PPIs can
be withdrawn in ATM or retransferred back into bank account. PPIs are of three types –
closed, semi-closed and open PPIs. There are two other kinds of hybrids where existing
banking license-holders along with a technology partner can issue PPI-like stored-value
products which operate as a specie of savings bank account of the PPI-holder or beneficiary.
PPIs can be physical bearer instruments as paper certificate or plastic card. PPIs can also be
non-physical in the form of a digital wallet. Both represent stored value which is linked to a
bank account of the beneficiary. PPIs are not to be misunderstood with Payments Bank. PPIs
have more restrictions than a Payments Bank which is a scaled-down version of a regular
savings bank account.

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Voucher 2(119) may be represented as follows:

Object Description
Instrument with obligation Created by contract between private Parties
Value represented As per terms of use
Stored value Nil; only value of obligation admitted
Obligor (person liable to discharge Issuer or other name obligor
admitted obligation)
Parties involved 3 or more parties – supplier, receiver and obligor
Voucher is therefore ‘instrument with obligation’ that is accepted as consideration. Voucher
does not contain any ‘stored value’ but ‘value-to-use’. This ‘value-to-use’ is credited into a
voucher by a contractual arrangement between the issuer-redeemer of the voucher. A
customer who redeems the voucher is not a party to the arrangement for creation of the
voucher. A voucher that is created changes hands through steps with a sliding-scale of
discounts until it is redeemed at the face value. This ‘value-to-use’ at the time of its creating
necessarily involves flow of payment from the issuer to the redeemer as such voucher
represent cash/cash equivalent received in advance entailing an obligation. But this value-to-
use, cannot be converted to cash but only expended or redeemed as per terms of use of
voucher. There is no regulation governing issue, transfer and redemption of vouchers except
terms of a lawful contract. Vouchers are not PPIs and hence not governed by Payments and
Settlement Systems Act, 2007. It is not uncommon for the available balance of ‘value-to-use’
to be credited into the digital wallet of a PPIs issued by the same issuer. But the difference is
that the part of the wallet balance representing stored value can be withdrawn but not the part
of the wallet balance representing value-to-use or voucher. Gift voucher issued by a merchant
that is a bearer certificate with a unique identification number or code is not a voucher that
agrees with this definition because this gift voucher is a close-ended PPI.
Another similar product is ‘loyalty points’ which also contains ‘value-to-use’ but the difference
is that in loyalty points, issuer-redeemer is the same person. Loyalty points issued represents
liability of the issuer towards the beneficiary without any underlying flow of payment and is
best described as ‘future discount’. That is, these points accrue in one transaction and based
on some conversion ratio, that can be redeemed as a discount in a subsequent transaction.
As the loyalty points are non-transferable where the issuer-redeemer is the same person, it is
not an instrument with obligation. Discount allowed in the subsequent transaction is towards
cancellation of points accrued from the earlier transaction. Similar to vouchers, loyalty points
also do not have any regulation governing its allotment and redemption except the terms of a
lawful contract. Nowadays, it is seen that the liability that accumulated loyalty points
represents, are being converted into voucher by transfer of liability by issuer to an
intermediary at a discounted value. From here onwards, due to intermediary’s involvement, an
instrument comes into existence with an obligation which is voucher.

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Yet another product coupon or token in the form of a ‘code’, where a customer becomes
entitled to discount at the very first purchase by citing this ‘code’. It is interesting to note that
entitlement to this code though not flowing from a transaction in the past, it is an entitlement
by accepting to enter into a transaction in the future. This acceptance is recorded by
registering on a website, downloading an app or any other positive act on the part of the
customer. Such codes also do not satisfy the requirements of a voucher for the same reasons
as applicable to loyalty points.
Among all these lies another transaction that may appear to overlap with definition of voucher,
due to the words of common understanding being used interchangeably with words having
specific statutory meaning and that is ‘Pass’. Pass is one which could be an entry pass or
customer’s pass or a free ticket. For example, a ticket to a cricket match is available for
`1,000/- but a company buys these tickets and distributes it to key customers as ‘free pass’. It
allows the customer to enjoy the cricket match without paying anything for the same. But the
company has already paid the ticket price to the organizers of the cricket match. Another
example could be free pass to view screening of a film and so on. There is a normal taxable
supply between the supplier of goods or services and the person who pays and buys the
‘pass’. There is another supply to be examined, between the person who pays and the person
who actually enjoys the goods or services. Whatever may be the conclusions reached
regarding the two transaction here, there is no voucher that comes into existence even if such
entry tickets are even designated as ‘free pass – not for sale’ and so on. However, if such
‘passes’ are printed and distributed out of the ordinary course of ticket sales without reference
to a specific event but permitting access to a basket of events and valid for a duration of time,
then it partakes the character of voucher – instrument with obligation. When the ‘Pass’ loses
its character as an ‘advance paid’ for a supply in future – whether to the Payer or any other
bearer – and becomes an ‘instrument with obligation’, then the ‘Pass’ becomes a voucher.
Criteria Money Voucher Loyalty Points
Instrument type Indian legal tender, Physical card / non- Points-statement of
foreign currency or physical account of accrued discount
stored value PPI of cash received from past
cash paid transactions
Beneficiary Bearer of cash or Bearer or account- Account-holder
account-holder of holder
PPI
Represents cash Yes, paid by Yes, paid by third No, notional credit of
deposited Beneficiary * party Issuer * loyalty points
Paid value = Face Yes, no discount No, discounted NA
value on redemption and no premium value is paid by
redemption of face
value

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Paid value Yes, stored-value No, only value-to- NA, discount-to-

refundable use claim
Transferrable No Yes Yes **
Issuer is redeemer Yes No Yes
Redemption by Bearer Bearer Account-holder
Unredeemed value Continues Loss to issuer Lapse
Governing law PSS Act Contract Act Contract Act
* includes nominee of bearer-instruments
** becomes voucher on transfer of accumulated points before redemption
Illustrations:
Illustration Voucher or Not Nature of Instrument
Shopping gift card purchased for Not voucher It’s money, by way of ‘stored
`5,000/- value’ even if not encashable
Coupons or token given to customer Not voucher It is future discount by way of
by pizza outlet on making purchase ‘value-to-use’ not encashable
of `1,000/- which allows 10%
discount on next purchase
Money deposited into digital wallet Not voucher It’s money, by way of ‘stored
value’ though encashable
Points credited into digital wallet Not voucher It is future discount by way of
‘value-to-use’ not encashable
Transfer of liability towards Voucher Now it’s become an
accumulated loyalty points credited ‘instrument with obligation’
to customers
Pre-paid instruments: Not voucher It’s money received in
 Telephone calling card / advance to be settled by
recharge card making supplies in future
 Multi-currency traveller’s card
 DTH recharge card
Non-instrument based advances: Not voucher It’s money received in
 Receipt issued to customer for advance to be settled by
acknowledging advance making supplies in future
payment received towards PO
issued
 Advance booking of film ticket
 Train ticket purchased in
advance
 Contribution of instalments into
‘gold savings scheme’
 Time-share in resort

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The reason why it is important to differentiate whether it is a voucher or not, is that if the
instrument is money then tax is payable on the actual ‘paid-in value’ and not the ‘value-to-use’
(or redeemable face value). For example, customer pays advance of `1,00,000 to distributor
and the distributor transfers `80,000 to manufacture. GST payable by the distributor will be on
`1,00,000 and the GST payable by the manufacturer will be on `80,000. Ignoring the fact that
credit is not allowable, this would be the treatment in respect of any instrument that fits the
definition of money. However, if a voucher was supplied by the manufacturer to the distributor
of face value (or value-to-use) `1,00,000 but paid-in value `80,000, GST would be payable by
the manufacturer on `1,00,000 and not `80,000. Further, anomalies arise on account of
distributors liability to pay GST on `1,00,000 but with serious concerns on availability of credit
of tax charged by manufacturer. Without satisfying conditions under section 16(2) read with
rule 28, credit would not be available and tax would be collected on face value or value-to-use
and not the actual paid-in value. Payment of tax in the case of vouchers on face value or
value-to-use is found in rule 32(6).
It is important to understand that a similar provision as specified in relation to time of supply of
goods also exists in time of supply of services. It is reasonable to, therefore, infer that the
Government in its wisdom, in all probability, will treat ‘vouchers relating to goods’ and
‘vouchers relating to services’ as distinct and separate class of transactions. What does one
understand by ‘vouchers relatable to goods’ and ‘vouchers relatable to services’? A layman
would comprehend that vouchers relatable to goods would be those class of transactions
which can be exchanged for goods whereas vouchers relating to services being distinct and
separate can be exchanged only for services. There can be a third class of transactions
relating to vouchers, namely, a gift voucher issued by a bank which can be exchanged only for
cash. But a plain reading of definition of goods and services indicates that they both exclude
money. Therefore, such vouchers relatable to cash / money can be safely assumed to be
outside the ambit of GST laws.
It is possible for one to construe that a voucher relating to goods can be embedded for the
provision of services also. Such class of transactions must be read with Schedule II to
understand whether they are to be treated as goods or as services and thereafter apply the
principles laid down to the transaction as if they were goods or services. And in such
situations, await until time of redemption to determine the rate of tax and class of supply.
Interesting situations arise in respect of such transactions. For instance, the points
accumulated in a credit card could be used to exchange for goods or issue of an air ticket.
Difficulty arises in taxing such transactions in the hands of the person issuing such points.
However, the taxability or otherwise of such accumulated points would need detailed
deliberations based on facts and surrounding circumstances of each case.
As discussed above, the time of supply of goods in case of supply of vouchers by a supplier
will be:
(a) date of issue of voucher if the supply is identifiable at that point
(b) date of redemption of voucher in all other cases

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This basically means that if the exact nature of goods to be supplied along with its quantity
value of such goods are available when the voucher is issued, the time of supply will be the
date of issue of voucher. On the other hand, if the nature of supply of goods are not available
at the time of issue of voucher, then the time of supply will be considered as the date of
redemption of voucher. This is not to say that the time of supply will determine the value also.
This is because as per Rule 32(6), the value will always be the redemption or face value of the
voucher irrespective of the time of supply.
(e) Time of Supply – Residuary
Where none of the above provisions are able to satisfactorily answer the time of supply, it is to
be determined based on the residuary provision which states that the time of supply is:
(i) where a periodical return has to be filed, the due date prescribed for such return; or
(ii) in any other case, the date of payment of the tax.
Time of supply under this residuary provision is applicable only when the other provisions are
found to be inapplicable and not merely when there is some difficulty in determining the facts
that are sought for by the relevant provision.
(f) Time of Supply – Special Charges
Special charges imposed for delay in payment of consideration will enjoy the facility of time of
supply being date of receipt of the charges imposed, that is, cash-basis of payment of GST.
The various issues involved in these special charges are discussed in detail under time of
supply of services which may kindly be referred.
Illustration 13: Mr. X enters into a contract for supply of goods worth ` 5,00,000 with Mr. Y on
10th April 2018. Such goods are removed with an invoice dated 12th April 2018 on 13th April
2018 for delivery to Mr. Y. The terms of the contract demanded the payment against such
supply to be made within 60 days beyond which a late payment charge of ` 10,000 will have to
be paid by Mr. Y. Mr. Y makes the payment of Rs, 5,00,000 along with the late payment
charges on 15th July 2018. What will be the time of supply in respect of the entire amount?
Answer: In Section 12(2), the time of supply in respect of ` 5,00,000 will be the date of
issuance of invoice or last date of issuance of invoice. Last date of issuance of invoice will be
the date of removal where supply involves movement of goods.
Date of issuance of invoice: 12th April 2018
Last date of issuance of invoice: 13th April 2018 (date of removal)
The date of payment is immaterial as per Notification no. 66/2017-Central Tax dated 15th
November 2017 as already discussed above. So, the time of supply will be 12th April, 2018 in
respect of ` 5,00,000.
However, in respect of the time of supply for the amount of Rs, 10,000 paid as late payment
charges, time of supply as per Section 12(6) has been stated to be the date on which the
supplier receives the addition in value. Here, the additional amount of ` 10,000 is received on
15th July 2018. So, the time of supply for this amount will also arise on 15th July 2018..

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Some illustrations for better understanding of the provisions of time of supply of goods
Concept Invoice Invoice Payment Credit in Time of
illustrations date due date entry in bank supply
Section 12(2) supplier's account
books
1 Invoice raised 10-Oct-17 20-Oct-17 26-Oct-17 30-Oct-17 10-Oct-17
before removal
2 Advance received 30-Oct-17 20-Oct-17 10-Oct-17 30-Oct-17 10-Oct-17
(See Note 1)
3 Advance received 30-Nov-17 20-Nov-17 16-Nov-17 30-Nov-17 20-Nov-17
Notes:
1. The Notification 40/2017 dated 13.10.2017 exempts a taxable person not registered under
the composition scheme and having aggregate turnover less than ` 1.50 crores, for
payment of tax on receipt of advance. This Notification will be effective from 13.10.2017
and as such a taxable person is liable to remit tax on any advances received prior to
13.10.2017.
2. The Notification No. 66/2017 dated 15.11.2017 exempts all taxable persons from payment
of tax on the advances received in relation to supply of goods. This Notification will be
effective from 15.11.2017 and as such, the date of receipt of advance will not be relevant
to determine the time of supply of goods thereafter.
Supply involves Invoice/ Removal Delivery Receipt Time of
movement of documen of goods of goods of supply
goods t date payment
Section 12(2) r/w
Section 31(1)(a)
4 Delayed issue of 26-Oct-17 20-Oct-17 26-Oct-17 26-Oct-17 20-Oct-17
invoice
5 Inter-State stock 10-Oct-17 20-Oct-17 26-Oct-17 10-Nov-17 10-Oct-17
transfer
6 Advance received, 30-Oct-17 10-Nov-17 14-Nov-17 30-Oct-17 30-Oct-17
invoice for full 20-Nov-17 30-Oct-17
amount issued on
same day (40%
advance, 60% post
supply payment)

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Supply otherwise Invoice Receipt Delivery Receipt Time of

than by involving date of invoice of goods of supply
movement of by payment
goods recipient
Section 12(2) r/w
Section 31(1)(b)
7 Delayed issue of 30-Oct-17 05-Nov-17 26-Oct-17 10-Nov- 26-Oct-17
invoice 17
8 Invoice issued 20-Oct-17 10-Nov-17 26-Oct-17 10-Nov- 20-Oct-17
prior to delivery 17

Continuous Invoice Removal Due date Receipt Time of

supply of goods date of goods of paymen of supply
Section 12(2) r/w t as per payment
Section 31(4) agreement
9 Contract provides 01-Nov-17 15-Oct-17 05-Nov-17 01-Nov-17 01-Nov-17
10 for successive 25-Oct-17
statements of 11-Dec-17 08-Nov-17 05-Dec-17 11-Dec-17 05-Dec-17
account/
30-Nov-17
successive
11 payments 08-Jan-18 14-Dec-17 05-Jan-18 01-Jan-18 01-Jan-18
23-Dec-17

Reverse charge Date of Removal Receipt Payment Time of

Section 12(3) invoice of goods of goods by supply
issued by recipient
supplier
12 Receipt of goods 31-Oct-17 31-Oct-17 20-Nov-17 30-Nov-17 20-Nov-17
13 Advance paid 31-Oct-17 31-Oct-17 20-Nov-17 05-Nov-17 05-Nov-17
14 No payment made 31-Oct-17 30-Dec-17 05-Jan-18 - 01-Dec-17
for the supply

Sale on approval Removal Issue of Accepted Receipt Time of

basis of goods invoice by of supply
Section 12(2) r/w recipient payment
Section 31(7)
15 Acceptance 01-Nov-17 25-Nov-17 15-Nov-17 25-Nov-17 15-Nov-17
communicated
within 6 months of
removal

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16 Amount paid to 01-Nov-17 25-Nov-17 15-Nov-17 12-Nov-17 15-Nov-17

supplier before
informing
acceptance
17 Acceptance not 01-Oct-17 15-May-18 15-May-18 02-May-18 01-Apr-18
communicated
within 6 months of
removal
Statutory Provisions
13. Time of supply of services
(1) The liability to pay tax on services shall arise at the time of supply, as determined in
accordance with the provisions of this section.
(2) The time of supply of services shall be the earliest of the following dates, namely:—
(a) the date of issue of invoice by the supplier, if the invoice is issued within the
period prescribed under 2[sub-section (2) of] section 31 or the date of receipt of
payment, whichever is earlier; or
(b) the date of provision of service, if the invoice is not issued within the period
prescribed under 3[sub-section (2) of] section 31 or the date of receipt of
payment, whichever is earlier; or
(c) the date on which the recipient shows the receipt of services in his books of
account, in a case where the provisions of clause (a) or clause (b) do not apply:
Provided that where the supplier of taxable service receives an amount up to one
thousand rupees in excess of the amount indicated in the tax invoice, the time of supply
to the extent of such excess amount shall, at the option of the said supplier, be the date
of issue of invoice relating to such excess amount.
Explanation. ––For the purposes of clauses (a) and (b)––
(i) the supply shall be deemed to have been made to the extent it is covered by the
invoice or, as the case may be, the payment;
(ii) “the date of receipt of payment” shall be the date on which the payment is
entered in the books of account of the supplier or the date on which the payment
is credited to his bank account, whichever is earlier.
(3) In case of supplies in respect of which tax is paid or liable to be paid on reverse charge
basis, the time of supply shall be the earlier of the following dates, namely:––

2 Omitted vide The Central Goods and Services Tax Amendment Act, 2018 w.ef. 01.02.2019
3 Omitted vide The Central Goods and Services Tax Amendment Act, 2018 w.e.f. 01.02.2019

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(a) the date of payment as entered in the books of account of the recipient or the
date on which the payment is debited in his bank account, whichever is earlier; or
(b) the date immediately following sixty days from the date of issue of invoice or any
other document, by whatever name called, in lieu thereof by the supplier:
Provided that where it is not possible to determine the time of supply under clause
(a) or clause (b), the time of supply shall be the date of entry in the books of account of
the recipient of supply:
Provided further that in case of supply by associated enterprises, where the supplier of
service is located outside India, the time of supply shall be the date of entry in the
books of account of the recipient of supply or the date of payment, whichever is earlier.
(4) In case of supply of vouchers by a supplier, the time of supply shall be––
(a) the date of issue of voucher, if the supply is identifiable at that point; or
(b) the date of redemption of voucher, in all other cases.
(5) Where it is not possible to determine the time of supply under the provisions of sub-
section (2) or sub-section (3) or sub-section (4), the time of supply shall––
(a) in a case where a periodical return has to be filed, be the date on which such
return is to be filed; or
(b) in any other case, be the date on which the tax is paid.
(6) The time of supply to the extent it relates to an addition in the value of supply by way of
interest, late fee or penalty for delayed payment of any consideration shall be the date
on which the supplier receives such addition in value.
Relevant circulars, notifications, clarifications issued by Government:
1. Notification No. 9/2017 – Central Tax dated 28.06.2017 Seeks to appoint 01.07.2017 as
the date on which the provisions of Section 12 are effective.
2. Notification No. 13/2017 – Central Tax (Rate) dated 28.06.2017 Categories of services
on which CGST is payable under reverse charge mechanism.
3. Notification No. 66/2017 – Central Tax dated 15.11.2017 Seeks to exempt all taxpayers
from payment of tax on advances received in case of supply of goods (This notification is
issued superseding the earlier Notification No. 40/2017 – Central Tax dated 13.10.2017
wherein the exemption from payment of tax on receipt of advances was extended to to a
registered person whose aggregate turnover is less than ` 1.5 crores);
4. Notification No. 10/2017 – IGST (Rate) dated 28.06.2017 Categories of services on
which IGST is payable under reverse charge mechanism
5. Notification No. 4/2018 - Central Tax (Rate) dated 25.01.2018 providing special
procedure with respect to payment of tax by registered person supplying service by way
of construction against transfer of development right and vice versa.
6. Circular No. 38/12/2018 dated 26.03.2018 is issued clarifying the levy of GST, time of
supply of goods and value of supply in case of goods sent for job-work.

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Related provisions of the Statute:

Section or Rule Description
(CGST / SGST)
Section 2(12) Definition of Associated Enterprises
Section 2(31) Definition of Consideration
Section 2(41) Definition of Document
Section 2(56) Definition of India
Section 2(66) Definition of Tax Invoice or Invoice
Section 2(87) Definition of Prescribed
Section 2(93) Definition of Recipient
Section 2(97) Definition of Return
Section 2(98) Definition of Reverse Charge
Section 2(102) Definition of Services
Section 2(105) Definition of Supplier
Section 2(118) Definition of voucher
Section 7 Scope of Supply
Section 9 Levy and Collection
Section 14 Change in rate of tax in respect of supply of goods or services
Section 15 Value of taxable supply
Section 31 Tax invoice
Section 39 Furnishing of returns
13.1 Analysis
(a) Time of Supply – Forward Charge
Similar to goods, time of supply of services is prescribed to be the earlier of date of issue of
invoice and date of receipt of payment. Date of issue of invoice requires us to examine section
31 which deals with the requirement to issue a “tax invoice”. In relation to services, section 31
requires that a tax invoice be issued whether before or after provision of service. Further,
there is a time limit beyond which tax invoice to be issued in arrears cannot be delayed after
completion of the provision of service.
Rule 47 of the CGST Rules prescribes the time period within which such invoice should be
issued. It states that in case of the taxable supply of services, invoice should be issued within
30 days from the date of supply of services. In case of banking company/financial
institution/non-banking financial company, the time period becomes 45 days from the date of

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supply of services. When these banking/financial institution/non-banking financial

institution/telecom operator companies make taxable supplies of services between distinct
persons, invoice may be issued before or at the time such supplier records the same in his
books of account or before expiry of the quarter during which the supply was made.
If the invoice is issued within the prescribed time period, the time of supply will be the earlier
of the date of issue of invoice or the date of payment. If the invoice is issued after the
prescribed time period, the time of supply will be the earlier of the date of completion of
service or the date of payment. If none of these two cases are applicable, then the time of
supply will be the date when the recipient shows the receipt of services in his books of
accounts.
Please recollect the discussion in Chapter III where it has been explained that in accordance
with Schedule II, supplies involving goods may be treated as supply of services. In all such
cases, as in the case of services ordinarily understood, this provision alone applies for
determination of time of supply. One may also refer to Chapter VII regarding issuance of tax
invoice in all other circumstances and determine from there the fact of issuance of tax invoice.
Therefore, where the tax invoice has been issued accordingly, the time of supply can be
determined to be earlier of date of issuance of such tax invoice or date of receipt of payment.
Illustration 1: Mr. X provides consultancy services to Mr. Y worth ` 50,000.
08.04.2018 – An advance of ` 10,000 is received from Mr. Y
10.04.2018 – The consultancy services are provided
16.05.2018 – Mr X receives balance payment of ` 40,000 and records it in his books.
What will be the time of supply assuming Mr. X issues the invoice on:
Situation 1 - 15.04.2018
Situation 2 – 15.05.2018
Answer:
Situation 1: If invoice is issued within the prescribed time period, time of supply will be the
date of receipt of payment or date of issue of invoice whichever is earlier. In the given case,
the invoice is issued on 15.04.2018 which is within 30 days of the supply of services which is
within the prescribed period. So, for ` 10,000, the time of supply will be 08.04.2018 which is
the date of receipt of advance payment. For the balance amount, time of supply will be
15.04.2018 which is earlier of 15.04.2018 (date of invoice) and 16.05.2018 (date of receipt of
payment).
Situation 2: If invoice is not issued within the prescribed time period, time of supply will be the
earlier of the date of completion of service and the date of receipt of payment. Here, invoice is
issued on 15.05.2018 which is after the prescribed time period. So, for ` 10,000, the time of

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supply will be 08.04.2018 which is the date of receipt of advance payment. For the balance
amount, time of supply will be 10.04.2018 which is earlier of 10.04.2018 (date of completion of
service) and 16.05.2018 (date of receipt of payment).
Illustration 2: During investigation, it was found that Mr. X had provided catering services of `
1,00,000 to Mr. Y during his business convention. The payment for these services was made
in cash. Mr. X had neither issued any invoice nor recognised the payment in his books of
accounts. Mr. Y recorded the payment of ` 1,00,000 in cash in his books on 28th April 2018.
What will be the time of supply in this case?
Answer: Since, the date of receipt of payment or the date of invoice is not available in case of
Mr. X, the date when the payment is recorded in the books of the recipient becomes relevant.
Since, Mr. Y recorded this on 28th April, the time of supply for such supply will also be
considered as 28th April 2018.
Exceptions:
(i) When an amount in excess of tax invoice is received up to ` 1,000/-, the time of
supply in respect of such excess at the option of the supplier shall be the date of such
invoice.
Illustration 3: A telephone company receives ` 4,000 on 27th July 2018 against an invoice of `
3,700 on 23rd July 2018 in respect of the services provided. The excess amount of ` 300 can
be adjusted against the invoice to be issued in the next month. Time of supply will arise only
for ` 3700 on 23rd July 2018. For the balance amount of ` 300, the time of supply may not arise
on 27th July 2018 at the option of the supplier and may be adjusted against the next month’s
invoice.
(ii) Supply shall be deemed to have been made to the extent the value of supply indicated
in the invoice or the value of payment received by the supplier.
Illustration 4: In Illustration 3, assume that the payment received was ` 5000 instead of ` 4000.
Since, the amount exceeds ` 1000 in terms of the excess payment received, there is no option
with the supplier. Here, the supply will be deemed to have been made to the extent of the
invoice of ` 3700 on 23rd July 2018 and the balance amount of ` 1300 will be liable to tax on
27th July 2018.
(iii) Date of receipt of payment shall be the date on which the payment is accounted in the
books of the supplier or the date reflected in the bank account of the supplier,
whichever is earlier.
Illustration 5: Assume that payment is recorded in the books of the supplier on 25th July 2018
and the date as per the bank statement is 27th July 2018. In this situation, the date of receipt
of payment will be taken as 25th July 2018 as it will be earlier of the two events.
Continuous supply of services
As per Section 2(33) of the CGST Act 2017, continuous supply of services means a supply of
services which is provided or agreed to be provided continuously or on recurrent basis under a

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contract for a period exceeding three months with periodic payment obligations and includes
supply of services as the Government may subject to such conditions as it may by notification
specify.
This means that there are three important conditions to be satisfied in order to be a
continuous supply of services:
(a) The services should be provided continuously or on recurrent basis
(b) The contract period should be exceeding three months
(c) The payment obligations should be periodical
For instance an annual maintenance contract, construction contract etc. may be considered as
continuous supply of services if the aforesaid conditions are satisfied. As stated in the context
of goods, continuity of supply does not imply continuous supply. If each transaction is
concluded satisfactorily, there cannot be a continuous supply. There must be something that
cause the mere performance and insufficient to conclude the contractual performance of
supplies. Merely delaying the invoicing cannot imply continuous supply.
The date of issuance of invoice in respect of continuous supply of services has been given
under Section 31(5) of the CGST Act 2017 as follows:
(I) Where the due date of payment is ascertainable from the contract, the invoice will be
issued on or before the due date of payment.
(II) Where the due date of payment is not ascertainable from the contract, the invoice will
be issued before or at the time when the supplier of services receives the payment
(III) When the payment is linked to the completion of an event, the invoice will be issued on
or before the date of completion of that event.
Illustration 6: Mr. X is getting construction services from a developer against buying of an
under-construction flat for the period 01/07/2017 to 31/03/2018 for ` 150,00,000. The
transactions are structured as follows:
Situation 1: Equal instalments to be paid at the end of every quarter

Periodic Date of Invoice Actual payment Value

completion of dates
service
30-09-2019 03-10-2019 15-10-2019 50,00,000
31-12-2019 02-12-2019 03-02-2020 50,00,000
31-03-2020 10-04-2020 20-03-2020 50,00,000

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Situation 2: Payment to be made as per mutual understanding

Periodic Date of Invoice Actual payment Value
Completion of dates
service
31-12-2017 14-01-2020 12-01-2020 90,00,000
31-03-2020 22-04-2020 02-04-2020 60,00,000

Situation 3: 40% payment on 40% completion and balance payment on 100% completion
Periodic Date of Invoice Actual payment Value
Completion of dates
service
01-10-2019 29-09-2019 05-10-2019 60,00,000
31-03-2020 24-04-2020 28-04-2020 90,00,000
Answer: This is a case of continuous supply of services. The first question that should be
determined in these cases is whether the invoice is issued within the prescribed time period. If
issued within the prescribed time period, the time of supply will be the date of issue of invoice
or the date of receipt of payment whichever is earlier. If the invoice is issued after the
prescribed period, then the time of supply will be the date of completion of service or the date
of receipt of payment whichever is earlier.
Situation 1: In this situation, the due date of payment can be ascertainable from the contract.
So, the last date of issuance of invoice will be the due date of payment. The due date of
payment will be end of each quarter. So, the time of supply will be determinable as follows:
Periodic Date of Actual Value Invoice Time of
Completion Invoice payment issued supply
of service dates within time
limit
30-09-2019 03-10-2019 15-10-2019 50,00,000 No 30-09-2019
31-12-2019 02-12-2019 03-02-2020 50,00,000 Yes 02-12-2019
31-03-2020 10-04-2020 20-03-2020 50,00,000 No 20-03-2020
Situation 2: In this situation, due date of payment is not ascertainable from the contract. So,
the invoice is to be issued before or at the time when the supplier of services receives the
payment. So, the time of supply will be determinable as follows:

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Periodic Date of Actual Value Invoice Time of

Completion Invoice payment issued supply
of service dates within time
limit
31-12-2019 04-01-2020 12-01-2020 90,00,000 Yes 04-01-2020
31-03-2020 22-04-2020 02-04-2020 60,00,000 No 31-03-2020
Situation 3: In this situation, the payment is linked to the completion of event. The invoice
should be raised on or before the completion of that event (i.e. 40% or 100% completion as
the case may be). So, the time of supply will be as follows:

Periodic Date of Actual Value Invoice Time of

Completion Invoice payment issued supply
of service dates within time
limit
01-10-2019 29-09-2019 05-10-2019 60,00,000 Yes 29-09-2019
31-03-2020 24-04-2020 28-04-2020 90,00,000 No 31-03-2020
Cessation of supply of services before the completion of the supply
As per Section 31(6) of the CGST Act 2017 where the supply of services ceases before the
completion of the supply, the invoice is to be issued at the time when the supply ceases and
such invoice shall be issued to the extent of the supply made before such cessation.
Illustration 7: A contract for supply of professional services was entered for ` 5,00,000 for the
period of two months on 20th July 2017. However, on 16th August 2017, the recipient informed
the supplier that he is not willing to receive any more services under the contract. Both of
them mutually agree that the services provided till date can be valued at ` 3,50,000. The
invoice for this was issued on 20th August 2018 and the payment was made by the recipient on
25th August 2018.
Answer: Here the cessation of supply of services occurs on 16th August 2017. The date by
which the invoice should have been raised was also 16th August 2017. However, the invoice
was issued on 20th August 2017 which is after the prescribed time period. So, the time of
supply will be the earlier of the date of completion of service (16th August 2017) and the date
of payment (25th August 2017) which will be 16th August 2017.
(b) Time of Supply – Reverse Charge
Where tax is payable on reverse charge basis, the time of supply is appointed to be the earlier
of date of payment or 61st days from the date of issue of invoice by the supplier. If for any
reason, one or all of these two dates cannot be determined then the time of supply will be the
date of recording the supply in the books of the recipient.
In case of transactions between ‘associated enterprises’ where the supplier of service is
located outside India, the date of recording the supply in the books of the recipient or the date

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of payment whichever is earlier, will be the time of supply. ‘Associated Enterprises has been
defined in Section 2(12) of CGST Act, 2017. The section defines the term as "associated
enterprises" shall have the same meaning as assigned to it in section 92A of the Income-tax
Act, 1961 (43 of 1961).
Again, please note that in view of the definition of reverse charge in section 2(98), the above
provision does not apply to payment of tax by an electronic commerce operator but only to
those cases of supply which fall under sub-section 5 of section 9 of the Act.
Illustration 8: Mr. X provides legal services as an advocate to Mr.Y which fall under reverse
charge basis.
10.04.2018 – The services are provided to Mr.Y
12.04.2018 – Mr. X issues an invoice to Mr.Y
10.07.2018 – The payment is made by Mr.Y through a cheque and recorded in his books of
accounts
15.07.2018 – The payment gets debited from Mr. Y’s bank account
What will be the time of supply?
Answer: The time of supply shall be earlier of the following dates:
The date of payment i.e. 10.07.2018 (earlier of 10.07.2018 and 15.07.2018)
The date immediately following sixty days from the date of issue of invoice i.e. 12.06.2018
(12.04.2018+60days+1day).
Therefore, the time of supply shall be 12.06.2018.
(c) Time of Supply – Vouchers
Please refer to discussion regarding time of supply of goods for some background discussion
about actionable claims. For purposes of this discussion on time of supply of services, please
note the following comments:
(i) the discussion on actionable claims being includible as vouchers is relevant vis-à-vis
services for the only reason that certain transactions involving goods are deliberately
treated as supply of services by Schedule II and to this extent actionable claims which
are a sub-set of goods need to be referred in this Chapter;
(ii) vouchers are not entirely comprised only of actionable claims and services can also be
included
Now, the time of supply in the case of vouchers is stated to be:
(i) the date of issue of voucher if the supply is identifiable at that point; or
(ii) in all other instances, the date of redemption of the voucher.
From the above provision, it can be seen that at the time of issue of voucher, it is possible that
the supply is not identifiable. So, the following key statements can be considered in this
regard:

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(i) Vouchers may be issued with specific or non-specific end-use;

(ii) Vouchers are issued on payment of money;
(iii) Vouchers themselves are not legal tender;
(iv) Vouchers represent some carried value in money terms;
(v) Vouchers are accepted as substitute for payment for a supply due to their carried value;
(vi) Vouchers are not merely receipts for pre-payment received;
(vii) Vouchers must be non-cancellable such that they cannot be reconverted back into
money;
(viii) Vouchers may be in physical or digital form but comprise the above characteristics.
When vouchers are issued for specific end-use, then they are taxable as supply provided they
otherwise satisfy the requirements of section 7 of the Act. Since, a specific provision exists in
respect of time of supply of vouchers, they are not goods or services in themselves, but are
singled out for the limited purposes of prescribing the time of their supply. And the rate of tax
will be that applicable to goods or services they are issued in respect of or that applicable at
the time of redemption. Vouchers are not merely receipts for pre-payment received because
prescribing a specific time of supply would be redundant when time of supply already
considers advance payments.
Please also note that the Government has issued the Payment and Settlement Systems Act,
2007 (‘PSS Act’) and accordingly, not everyone is permitted to issue instruments that may be
used as a Payment System. RBI is expected to make major changes to the circulars issued in
terms of the PSS Act by June 2017 but the framework or principles borrowed from the current
circulars for the purposes of GST is expected to remain unaltered although changes may
come in areas of governance, ease of doing business and inclusive growth in e-payment
offerings through these Pre-Paid Instruments or PPIs. (refer RBI Circular No.RBI/DPSS/2017-
18/58 dated 11 Oct, 2017)

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(d) Time of Supply – Residuary

Where none of the above provisions are able to satisfactorily answer the time of supply, it is to
be determined based on the residuary provision which states that the time of supply is:
(i) where a periodical return has to be filed, the due date prescribed for such return; or
(ii) in any other case, the date of payment of the tax.
(e) Time of Supply – Special Charges
Sometimes there may be charges imposed by the supplier on account of some deviation or
special circumstance from the expected terms of contract on the part of the recipient. These
special charges may be enabled by the contract though not necessarily attracted at the time of
supply of the underlying goods or service (other than these special charges) or may be agreed
later – when the special circumstance occurs. These special charges are listed as interest,
late fee or penalty on account of delay in payment of consideration. In these cases, the time of
supply is appointed to be the date of receipt by the supplier. It is this express provision that
bring to light that (i) these special charges are not a separate supply but merely additional
consideration for original supply and (ii) time of supply of these special charges would have
been the time of supply of the original supply (attracting interest liability too) but for the
express mention that it will be on the date of realization, notwithstanding that a supplementary
invoice or debit note is issued towards these special charges.

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Further, this express provision also makes it clear that in all other cases, where a
supplementary invoice or debit note is issued towards ‘any other charges’ (not coming within
this provision) would not enjoy ‘realization date’ as its time of supply but continue to operate
with reference to time of original supply (and hence be exposed to interest). Bona fide cases
where additional consideration (other than such special charges) comes to light after an
interval of time, perhaps even after arbitral proceedings, there does not appear to be any relief
from consequential interest, although it would be much deserved and logical. As deserving
merits of the case or logic do not appeal to tax legislation, present express provision only in
once case (of special charges) would amount to absence of express provision in all other
cases. And hence, all consequences in law would attach to any additional consideration
charged after time of original supply except these special charges. Remedy in such cases
would be to include ‘interest cost’ in the claim for additional consideration as it is not a new
supply and the same reason that recipient (or arbitral panel) accepts payment of additional
consideration (for original supply) must take responsibility for the belated acceptance of dues.
Law cannot forego interest because of bona fides of the claim. Law merely follows the facts
presented by parties and in case of claim of additional consideration, except these special
charges, there is a delay in payment of tax on original supply and that attracts interest from a
strict interpretation of law. Beneficial interpretation of law is scarcely favoured approach in
interpretation of tax law. Refer also to a corresponding discussion about ‘shifting’ of time of
supply in the context of debit note in the chapter on tax invoice under section 34.
Please note that even though a debit note may be issued after reaching agreement with the
recipient about the special charges imposed, the time of supply continues to remain ‘date of
receipt’ of payment towards such special charges. This is a departure from the provisions on
accrual principle in section 31. As this is a special provision, the same will prevail over all
other general provisions.
It is important to understand that due to time of supply being prescribed, whether the
imposition of these special charges is itself a supply or not? Please see the following
comparative discussion:
Special Charges ‘are’ Supply Special Charges ‘are not’ Supply
Special charges are also supply being There is no ‘supply’ in the case of interest,
agreeing to an act or forbear an act or to late fee or penalty as these special charges
tolerate an act (Entry 5(e) of Schedule II) are a consequence of a departure from the
read with section 2(31) agreed terms of contract and not in
fulfilment thereof
Interest, late fee or penalty are illustrations By accepting such an expansive
only and such special charges by any other interpretation, damages awarded by a Court,
name would also be liable to GST but on LD imposed in a contract, forfeiture of a
receipt-basis EMD, etc. can become liable to GST as
these are all in some way ‘in the course or
furtherance of business’
Special charges paid is liable to GST Other than the three special charges listed,

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whether agreed before or agreed any other charges arising from a transaction
subsequently as satisfaction of the limited is not liable to GST as it is not contemplated
non-performance in the arrangement of supply although not
imposed in all cases
Delay in payment is a primary deviation that Only ‘delay in payment’ gives rise to GST
gives rise to special charges but even incidence on the special charges. Any other
deviation in time or quantity of supply can deviation would be a variation of contract to
entail some other form of special charges, be independently examined if it satisfies
GST on those cannot be avoided as the definition of ‘supply’
these listed are only illustrative
Special charges are ‘linked’ to an underlying Special charges are ‘linked’ to an original
supply (original supply) and therefore all supply as such GST cannot be imposed on
forms of special charges would also be special charges without an original supply
liable to GST
From the above discussion, several necessary conclusions need to be reached, namely:
(i) whether the three listed charges are exhaustive or only illustrative?
(ii) whether delay in payment is the only occasion when this provision is attracted or
special charges imposed for any other default linked to the original supply will also
attract this provision?
(iii) whether special charges imposed for any other default (not delay in payment) is liable
to GST but not on receipt basis but accrual basis or are special charges for these cases
not at all liable to GST?
It appears that the three listed cases are exhaustive not by the three cases listed but the
circumstance for their imposition – delay in payment of consideration. So, any form of special
charges imposed is liable to GST on receipt basis but only if it is due to delay in payment of
consideration. Special charges imposed due to any other default by the recipient is then to be
examined if it is linked to an ‘original supply’ or is it by itself a supply? If linked to an original
supply, it is also liable to tax but not during enjoying flexibility to pay tax on receipt basis and
tax being payable based on the date of debit note. If not linked to an original supply, GST
would not be applicable if it does not satisfy the requirements of levy.
The issues raised in respect of special charges may be considered as matter of discussion
and does not carry a procurement of an opinion on view. Readers are free to connect on
these discussions and evaluate each such situation after giving it adequate consideration or
thought.
Some illustrations for better understanding of the provisions of time of supply of services
S. Concept Invoice Invoice Payment Credit in Time of
No. illustrations date due date entry in bank supply
Section 13(2) supplier' account

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s books
1 Invoice raised 10-Oct-19 20-Oct-19 26-Oct-19 30-Oct-19 10-Oct-19
before completion
of service
2 Advance received 30-Oct-19 20-Oct-19 10-Oct-19 30-Oct-19 10-Oct-19

Based on due Invoice Commen Completi Receipt Time of

date for invoicing date cement on of of supply
Section 13(2) r/w of service service payment
Section 31(2) r/w
Rule – 47 related
to invoice
3 Delayed issue of 26-Dec-19 20-Oct-19 16-Nov-19 28-Jan-20 16-Nov-19
invoice
4 Advance received, 30-Oct-19 30-Oct-19 30-Dec-19 30-Oct-19 30-Oct-19
invoice for full 04-Dec-19 30-Oct-19
amount issued on
same day (40%
advance, 60% post
supply payment)

Continuous Invoice Date as Receipt Entry of Time of

supply of services date per of provision supply
Section 13(2) r/w contract payment of
Section 31(5) services
in books
5 Section 31(5)(a) 02-Nov-19 10-Nov-19 15-Nov-19 31-Oct-19 02-Nov-19
Contract provides
17-Dec-19 10-Dec-19 15-Dec-19 30-Nov-19 10-Dec-19
for payments
monthly on the 10th 10-Jan-20 10-Jan-20 06-Jan-20 31-Dec-19 06-Jan-20
of succeeding
month
6 Section 31(5)(c) 12-Nov-19 10-Nov-19 25-Nov-19 12-Nov-19 10-Nov-19
Contract provides 24-Apr-20 24-Apr-20 20-Apr-20 24-Apr-20 20-Apr-20
for payments on
completion of event.
Recipient to pay
within 1 month from

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date of completion

Reverse charge Date of Date of Payment Entry of Time of

Section 13(3) invoice completion by receipt of supply
issued by of service recipient services in
supplier recipient's
books
7 Advance paid 31-Oct-19 31-Oct-19 05-Nov-19 31-Oct-19 05-Nov-19
8 Delay in payment 31-Oct-19 31-Oct-19 10-Jan-20 31-Oct-19 31-Dec-19
to vendor
9 Service received 31-Oct-19 30-Nov-19 05-Apr-20 31-Mar-20 31-Mar-20
from associated
enterprise located
outside India (No
time extension
allowed)

Issue of vouchers First Issue of Redempti Last date Time of

Section 13(4) [or service/ voucher on of for supply
Section 12(4)] delivery voucher acceptan
of goods ce of
voucher
11 Voucher issued to 01-Nov-19 01-Nov-19 14-Dec-19 30-Oct-20 01-Nov-19
a recipient after
supply of a service
[or specific goods],
for the same
service - valid for 1
year
12 Voucher issued to 01-Nov-19 01-Nov-19 14-Dec-19 30-Oct-20 01-Nov-19
a recipient of
machinery along at
the time of delivery,

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for availing repair

services [or specific
goods] worth `
5,000 - valid for 1
year
13 Voucher issued to 01-Nov-19 01-Nov-19 14-Dec-19 30-Oct-20 14-Dec-19
a recipient after
supply of a service,
for any other
services or goods
across India, - valid
for 1 year
14 Gift voucher for ` - 01-Nov-19 25-Dec-19 31-Mar-20 01-Nov-19
1,500 for services
[or goods]- valid for
6 months
(f) Time of Supply – Consideration involving Development Rights or Construction
Service
In case of Consideration involving Development Rights or Construction Service, the time of
supply is specially notified vide notification 4/2018 – Central Tax (R) dated 25.01.2018, under
the powers conferred by Section 148 of the CGST Act. Accordingly the liability to pay tax in
certain situations would be as below:

Situation Event requiring payment of taxes

Registered persons supplying development
rights to a developer, builder, construction
company or any other registered person
On transfer of possession or the right in the
against consideration, wholly or partly, in the
constructed complex, building or civil
form of construction service of complex,
structure, to the person supplying the
building or civil structure
development rights by entering into a
Registered persons supplying construction conveyance deed or similar instrument (for
service of complex, building or civil structure example allotment letter).
to supplier of development rights against
consideration, wholly or partly, in the form of
transfer of development rights.

If a registered builder supplies construction service in consideration of receiving development

rights from the owner, then the liability would arise for as a continuous supply of construction
service through the construction duration and completed on the date of handing over.

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If a registered landowner supplies development rights in consideration of construction service

received from builder, then the liability would arise for immediately upon entering into an
irrevocable agreement for supply of development rights although consideration in the form of
constructed area is handed over much later.
Now, where Notification No. 4/2018-CT is applicable, the time of supply is deferred until
handing over. But, please note that where non-refundable deposit (NRD) is paid by builder to
landowner or where landowner starts to sell apartment units (that are under construction),
then the time of supply will not be deferred but get advanced to these earlier events of
collection of NRD or booking agreement to end customers.
Further, where joint-development agreement are not on ‘area sharing’ basis but on ‘revenue
sharing’ basis, then firstly, Notification No. 4/2018-CT will not apply as this notification only
provides deferment of time of supply when there is an exchange. And when builder is liable to
pay cash (for development rights supply), time of supply will be the time when builder is put in
possession of the land. Please note that the landowner does not put the builder in possession
of the land again-and-again but at one-go, when the irrevocable agreement is executed and
registered. As such, the supply of development rights is at the start of the project. But the
credit to the builder will be subject to rule 37, that is, only to the extent payment if made by the
builder for the inward supply (of development rights) by the landowner. There is one view that
supply of development rights (in case of revenue sharing development) can be treated as
continuous supply so that builder is entitled to credit to the extent of each payment instalment
that is made. On this, no clear view is available from the tax administration but review of the
concept of continuous supply and the irrevocable development agreement may throw some
light.
With effect from April 1, 2019, treatment to TDR/FSI and Long term lease has been amended
for projects commencing after April 1, 2019. Vide Notification No. 4/2019 – CT(R), Exemption
has been granted to the supply of TDR, FSI, long term lease (premium) of land by a
landowner to a developer subject to the condition that the constructed flats are sold before
issuance of completion certificate and tax is paid on them. Exemption of TDR, FSI, long term
lease (premium) shall be withdrawn in case of flats sold after issue of completion certificate,
but such withdrawal shall be limited to 1% of value in case of affordable houses and 5% of
value in case of other than affordable houses.
Further, vide Notification No. 5/2019 – CT(R) dated 29th March, 2019 read with Notification
No. 7/2019 – CT(R) dated 29th March, 2019, in terms of liability to pay, the liability to pay tax
on TDR, FSI, long term lease (premium) shall be shifted from land owner to builder under the
reverse charge mechanism (RCM). Inline, vide Notification No. 6/2019 – CT(R), the
provisions relating to Time of Supply have also been amended to provide that the date on
which builder shall be liable to pay tax on TDR, FSI, long term lease (premium) of land under
RCM in respect of flats sold after completion certificate shall be the date of issue of
completion certificate. Also, the liability of builder to pay tax on construction of houses given
to land owner in a JDA is also being shifted to the date of completion. This shall be applicable

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for development rights or Floor Space Index (FSI) (including additional FSI) given on or after
1st April, 2019.
Statutory Provisions
14. Change in rate of tax in respect of supply of goods or services
Notwithstanding anything contained in section 12 or section 13, the time of supply, where
there is a change in the rate of tax in respect of goods or services or both, shall be determined
in the following manner, namely: ––
(a) in case the goods or services or both have been supplied before the change in rate of
tax, ––
(i) where the invoice for the same has been issued and the payment is also received
after the change in rate of tax, the time of supply shall be the date of receipt of
payment or the date of issue of invoice, whichever is earlier; or
(ii) where the invoice has been issued prior to the change in rate of tax but payment
is received after the change in rate of tax, the time of supply shall be the date of
issue of invoice; or
(iii) where the payment has been received before the change in rate of tax, but the
invoice for the same is issued after the change in rate of tax, the time of supply
shall be the date of receipt of payment;
(b) in case the goods or services or both have been supplied after the change in rate of
tax, ––
(i) where the payment is received after the change in rate of tax but the invoice has
been issued prior to the change in rate of tax, the time of supply shall be the date
of receipt of payment; or
(ii) where the invoice has been issued and payment is received before the change in
rate of tax, the time of supply shall be the date of receipt of payment or date of
issue of invoice, whichever is earlier; or
(iii) where the invoice has been issued after the change in rate of tax but the payment
is received before the change in rate of tax, the time of supply shall be the date
of issue of invoice:
Provided that the date of receipt of payment shall be the date of credit in the bank account if
such credit in the bank account is after four working days from the date of change in the rate
of tax.
Explanation. ––For the purposes of this section, “the date of receipt of payment” shall be the
date on which the payment is entered in the books of account of the supplier or the date on
which the payment is credited to his bank account, whichever is earlier.

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Relevant circulars, notifications, clarifications issued by Government:

1. Notification No. 9/2017 – Central Tax dated 28.06.2017 Seeks to appoint 01.07.2017 as
the date on which the provisions of Section 12 are effective.
2. Notification No. 66/2017 – Central Tax dated 15.11.2017 Seeks to exempt all taxpayers
from payment of tax on advances received in case of supply of goods (This notification is
issued superseding the earlier Notification No. 40/2017 – Central Tax dated 13.10.2017
wherein the exemption from payment of tax on receipt of advances was extended to a
registered person whose aggregate turnover is less than ` 1.5 crores);

Related provisions of the Statute

Section or Rule Description

(CGST / SGST)
Section 2(66) Definition of Tax Invoice or Invoice
Section 2(52) Definition of Goods
Section 2(102) Definition of Services
Section 2(105) Definition of Supplier
Section 7 Scope of Supply
Section 31 Tax invoice

14.1 Analysis
Payment of tax requires the presence of all the following events:
(i) supply of goods or services
(ii) issue of invoice
(iii) payment for the supply
When there is a change in the rate of tax during the occurrence of these 3 events, there may
be some concern about the applicability of the correct rate of tax. Section 14 addresses this
aspect clearly.
Where the supply takes place after the change in the rate of tax, the time of supply may be as
follows:
(a) Supply before the cut-off date-say 01-Sep-19
Supply Invoice Payment Time of Supply
25.08.2019 01.09.2019 05.09.2019 01.09.2019
(Invoice or payment, whichever is earlier)

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25.08.2019 26.08.2019 05.09.2019 26.08.2019(Date of Invoice)

25.08.2019 01.09.2019 27.08.2019 27.08.2019(Date of payment)
(b) Supply after the cut-off date-say 01-Sep-19
Supply Invoice Payment Time of Supply
01.09.2019 25.08.2019 05.09.2019 05.09.2019(Date of payment)
01.09.2019 25.08.2019 26.08.2019 25.08.2019
(Date of invoice or date of payment,
whichever is earlier)
01.09.2019 02.09.2019 26.08.2019 02.09.2019(Date of Invoice)
It is relevant to note here that the Notification No. 66/2017-CT dated 15.11.2017 exempting a
taxable person from payment of tax on advances received refers to the scenarios enumerated
in section 14. This may not mean that the receipt of payment in advance should not be
considered for determining the change in tax rate; since, the said notification will have limited
application for ascertaining the time of supply of goods. In other words, section 12 specifies
the scenarios for ascertaining time of supply whereas section 14 specifies the point of
determination of appropriate rate of tax in cases where the events impacting time of supply fall
in time zones having different rate of tax on such supply. This means that on application of the
said notification, if the date of receipt of advance is relevant, the payment of tax may be
deferred till the date of supply of goods at the rate applicable as on the date of receipt of
advance (point of taxation).
Although supply has not yet taken place, the time of supply determined as above is valid and
not in violation of the levy of GST for the following reasons:
(i) Supply is defined in section 7(1)(a) as ‘……made or agreed to be made…..’
(ii) Levy of GST in section 9 is on such supply, that is, ‘made or agreed to be made’
Prescribing the time of supply anterior to the time of actual supply is well accommodated in
the language of the Act.
Determination of time of supply under Section 14 has been provided as under:
Supply Invoice Payment Time of Supply
Before Rate Before Rate Before Rate Not governed by Section 14
Change Change Change
Before Rate Before Rate After Rate Date of issue of invoice
Change Change Change
Before Rate After Rate Before Rate Date of receipt of payment
Change Change Change

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After Rate After Rate After Rate Not governed by Section 14

Change Change Change
After Rate After Rate Before Rate Date of issue of invoice
Change Change Change
After Rate Before Rate After Rate Date of receipt of payment
Change Change Change
After Rate Before Rate Before Rate Date of receipt of payment or
Change Change Change date of issue of invoice,
whichever is earlier
Please note that in above chart, “the date of receipt of payment” shall be the date on which
the payment is entered in the books of account of the supplier or the date on which the
payment is credited to his bank account, whichever is earlier.
Considering that it is more common to come across of supply of services prior to issuance of
tax invoice, section 14 may operate predominantly in the context of services. Although not as
common, supply of goods being permitted without invoice being issued simultaneously,
section 14 does not cease to operate with respect of goods in instances dealt with in rule 55 of
CGST Rules.
Further, section 14 cannot be pressed into service where issuance of invoice is deliberately
(and perhaps with mala fide intentions) delayed. Section 14 is a provision that operates where
contractually invoice is issued with some interval of time where there is an intervening ‘change
of rate’ event. Where there is a deliberate omission to issue tax invoice, the date when the
invoice ought to have been issued will operate to fasten tax liability. It is not acceptable that
supply itself becomes uncertain due to non-issuance of tax invoice. Therefore, it is accepted
that section 14 operates in normal circumstances and not in extraneous and artificial
circumstances of belated invoicing as time of supply cannot be shifted ‘at will’ but by normal
course of business.

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