Study Guidelines by ICAI - for May, 2019 examination

Final (New) Course Paper 8: Indirect Tax Laws

List of topic-wise exclusions from the syllabus

(1) (2) (3)

S. No. in the syllabus

Topics of the syllabus Exclusions (Provisions which are excluded from the corresponding topic of the syllabus)

1(ii) Levy and collection of CGST and IGST – Application of CGST/IGST law; Concept of supply including composite and mixed supplies, inter-State supply, intra-State supply, supplies in territorial waters; Charge of tax; Exemption from tax; Composition levy

CGST Act, 2017 & IGST Act, 2017 (i) Rate of tax prescribed for supply of goods* (ii) Rate of tax prescribed for supply of services* (ii) Exemptions for supply of goods

1(v) Input tax credit Manner of reversal of credit of additional duty of customs in respect of Gold dore bar

1(vii) Procedures under GST – All procedures including registration, tax invoice, credit and debit notes, electronic way bill, accounts and records, returns, payment of tax including reverse charge, refund, job work

CGST Act, 2017 and CGST Rules, 2017 (i) Furnishing of GSTR-2, GSTR-1A, GSTR-3, GSTR-7,

GSTR-8 (ii) Claim of input tax credit and provisional acceptance

thereof (iii) Matching, reversal & reclaim of input tax credit (iv) Matching, reversal & reclaim of reduction in output tax

liability (v) Categories of supply of goods, tax on which is

payable on reverse charge basis under section 9(3)

IGST Act, 2017 • Categories of supply of goods, tax on which is

payable on reverse charge basis under section 5(3)

1(xvi) Other Provisions Transitional Provisions *Rates specified for computing the amount payable under composition levy are included in the syllabus. Notes: (1) Only the following sections of the CGST (Amendment) Act, 2018, which have become retrospectively effective from 1st July,

2017, are applicable for May, 2019 examination: (i) Section 3 of the CGST Amendment Act, 2018 amending section 7 of the CGST Act, 2017, and

(ii) Section 31 of the CGST Amendment Act, 2018 amending Schedule II to the CGST Act, 2017.

Section 28 of the CGST Amendment Act, 2018 which has amended section 140 of the CGST Act, 2017, though effective from 1st July, 2017, is not applicable for May, 2019 examination as section 140 covered under “Chapter XX – Transitional Provisions” has been excluded from the syllabus by way of Study Guidelines as mentioned above. It may be noted that all the remaining provisions of the CGST Amendment Act, 2018 have not been made effective till 31.10.2018 and hence, are not applicable for May, 2019 examination.

(2) In the above table, in respect of the topics of the syllabus specified in column (2) the related exclusion is given in column (3). Where an exclusion has been so specified in any topic of the syllabus, the provisions corresponding to such exclusions, covered in other topic(s) forming part of the syllabus, shall also be excluded.

(3) October, 2018 edition of the Study Material is relevant for May, 2019 and November, 2019 examinations. The amendments in Part-II: Customs & FTP - made after the issuance of this Study Material - to the extent covered in the

Statutory Updates for May, 2019 examination alone shall be relevant for the said examination. The Statutory Updates shall be hosted on the BoS Knowledge Portal.

(4) The entire content included in the October, 2018 edition of the Study Material, except the exclusions mentioned in the table above, and the Statutory Updates for May, 2019 examination shall be relevant for the said examination.

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Relevant Legal Provisions Section Rules

Section Subject Matter Rule Subject Matter

CGST Sec. 12 Time of supply of goods

Sec. 13 Time of supply of services

Sec. 14 Change in rate of tax in respect of supply of goods or services

IGST Sec 20 Application of provisions of CGST Act, 2017

- All above sections have been made applicable

Relevant Definitions

CGST 2 (12) Associated enterprises 2 (118) Voucher

GST liability to pay • Liability to pay GST has been linked to the time of supply of goods / services. • First, time of supply of goods and/or services is determined as per provisions of Sec 12 and Sec 13 of the CGST Act

respectively. • Liability to pay GST arises as per time of supply so determined. (Sec 12(1) & Sec 13(1) of CGST Act)

.

• This liability can be discharged upto the due date of filing of return. (Sec 39(7) of CGST Act)

• Delay in payment beyond this date will attract interest liability @18% p.a. in terms of Sec 50 of CGST Act..

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Due date for issuance of Invoice – it creates ToS

Receipt of payment – it also creates ToS

What does “date of receipt of payment” mean? It is the earliest of

… the date on which the payment is entered in the books of accounts of the supplier or … the date on which the payment is credited to his bank account.

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Section 14 : Change in RATE OF TAX in respect of supply of goods or services. ** Summary Table of Sec 14

Sec 14(a) Supply of G/S (DoS) ToS i) ---

Date

of Change (DoC)

DoI DoP

Earlier of [DoI, DoP]*

ii) DoI

DoP DoI

iii) DoP

DoI DoP*

Sec 14(b) Supply of G/S (DoS) ToS i) DoI

Date

of Change (DoC)

DoP

DoP*

ii) DoI DoP

-- Earlier of [DoI, DoP]*

iii) DoP

DoI DoI

.

.

* Normal supplier of goods :: GST shall be payable only upon invoicing [Sec 14 read with N/N 66/2017-CT]

** Author Sec 148 read with N/N 66/2017-CT In exercise of the powers conferred by section 148 of the CGST Act, 2017 (hereafter in this notification referred to as the said Act), the CG, on the recommendations of the Council, hereby notifies the registered person who did not opt for the composition levy under section 10 of the said Act as the class of persons who shall pay the central tax on the outward supply of goods at the time of supply as per section 12(2)(a) of the said Act including in the situations attracting the provisions of section 14 of the said Act, and shall accordingly furnish the details and returns and the period prescribed for the payment of tax by such class of registered persons shall be such as specified in the said Act. .

** Even in cases where ToS is to be determined as per Sec 14 of CGST Act (i.e., rate change situation), Advances will be non-taxable for normal supplier of goods while discharging his FCM liability.

Reckoning of date of payment- Special Manner in Sec 14

If (Date of entry in bank > Date of Change in Rate + 4 Working days) then DoP = Date of entry in Bank,

… 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 4 working days from the date of change in the rate of tax. .

Suppose, a TP is claiming receipt of payment in forms of cheques which were encahsed later on (thus, entry in books is earlier than entry in Bank) Now, if between these 2 days, GST rate has changed. Then, date of payment shall be determined in following manner: 1. Actual realization of cheque has taken place within 4 days of the date of change in GST Rate: - DoP shall be determined in normal

manner (i.e., earlier of ‘Entry in Books’ or ‘Entry in Bank’ 2. Actual realization of cheque has taken place beyond 4 days of the date of change in GST Rate: - DoP shall be determined in as

per the above proviso :: Thus, Date of Payment = Date of Entry in banks

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Time of Supply 1. What is time of supply?

(CBIC FAQ) Ans. The time of supply fixes the point when the liability to charge GST arises. It also indicates when a supply is deemed to have

been made. There are separate provisions for determination of time of supply for goods and services.

Note: 1. ToS = GST becomes payable 2. This GST can be paid without interest till the due date of filing of return. If GST paid beyond that date, then interest shall be

payable as per Sec 50 of CGST Act.

Liability to pay GST – linked to ToS 2. The time of liability to pay GST is independent of the time of supply of goods/ services. Discuss the correctness

of the statement? (CA Final – Test Series -May 2018)

Ans. The said statement is not correct. Liability to pay GST has been linked to the time of supply of goods / services. First, time of supply of goods and services is determined as per provisions of Sec 12 and Sec 13 of the CGST Act respectively. Liability to pay GST arises as per time of supply so determined. (Sec 12(1) & Sec 13(1) of CGST Act) This liability can be discharged upto the due date of filing of return. (Sec 39(7) of CGST Act) Delay in payment beyond the due date of filing of return will attract interest liability @18% p.a. in terms of Sec 50 of CGST Act.

Penal provisions for self-assessed liability 1. Every supplier shall self-assessed his liability (based on supplies whose ToS has arisen during the month) and shall pay tax

on/before the due date of filing return. 2. Delay in payment of tax – consequences thereof

• Levy of Interest: Sec 50 of CGST Act Any delay will attract interest @18% p.a.

• Levy of penalty: Sec 73(11) of CGST Act If self-assessed tax is not filed within 30 days of due date of payment of tax, then such supplier shall be liable to pay penalty equal to higher of two – (10% of tax) or (Rs 10,000)

Time Limits for issuance of invoices 3. What is the time period within which invoice has to be issued for supply of Goods (other than continuous supply

of goods)? (CBIC FAQ)

Ans. As per Section 31 of CGST/SGST Act a registered person shall issue a tax invoice showing description, quantity and value of goods, tax charged thereon and other prescribed particulars, before or at the time of ;

(a) removal of goods for supply to the recipient, where supply involves movement of goods or (b) delivery of goods or making available thereof to the recipient in other cases.

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4. What is the time period within which invoice has to be issued in a case involving continuous supply of goods? (CBIC FAQ)

Ans. In case of continuous supply of goods, where successive statements of accounts or successive payments are involved, the invoice shall be issued before or at the time each such statement is issued or, as the case may be, each such payment is received.

Certain Examples related to continuous supply of service : Example 1 — [Gas / Petrol / Steam Pipeline] : M/s. LOC has laid down pipeline at various places in the country. The gas or petroleum is supplied by IOC to many factories under a contract on continuous basis through pipeline. These pipelines connect the source of supply to the place of consumption / use. These supplies are made concurrent / regular basis and billing is also made accordingly. Similar system may exist in case of steam also, where steam generated by boiler is continuously transported to another factory. Example 2 — Use of Wire : Wire is used to supply electricity / power. Example 3 — Supplies of coal under a particular order or under FSA (Fuel Supply Agreement) is in the nature of continuous supply as the invoices are raised periodically. Individual dispatches may be covered under delivery challans and invoice may be issued for supplies made during a period as per the contract.

5. What is the time period within which invoice has to be issued for supply of Services (other than continuous

supply of services)? (CBIC FAQ)

Ans. As per Section 31 of CGST/SGST Act a registered person shall, before or after the provision of service, but within a period of 30 days from the date of supply of service, issue a tax invoice showing description, value of goods, tax payable thereon and other prescribed particulars. For Banking and Insurance companies, this period is 45 days. For inter-state self-supplies made by bank, insurance and telecom companies, invoices can be issued before or at the time such supplier records the same in his books of account or before the expiry of the quarter during which the supply was made. Further a registered person liable to pay tax on reverse charge basis is also required to issue invoice on the date of receipt of goods or services or both as per section 31(3)(f).

6. What is the time period within which invoice has to be issued in a case involving continuous supply of services? (CBIC FAQ)

Ans. In case of continuous supply of services, (a) where the due date of payment is ascertainable from the contract, the invoice shall be issued on or before due

date of payment.; (b) where the due date of payment is not ascertainable from the contract, the invoice shall be issued before or at

the time when the supplier of service receives the payment.; (c) where the payment is linked to the completion of an event, the invoice shall be issued on or before the date of

completion of that event. .

Example for Continuous Supply of Services : Vesuvius India Ltd. [2018 (15) G.S.T.L. 712 (A.A.R. – GST)] Monitoring production regularly is 'continuous supply of service' if period exceeds 3 months Facts : Applicant was manufacturing refractories and supplying them free of cost to service recipient. Applicant was running Contract Management System involving monitoring of production process, quality control, supply and replacement of refractories provided to service recipient / manufacturer of hot metal. Applicant paid for managing the flow of hot metal in production of iron and steel at an agreed rate per tonne of liquid metal manufactured by service recipient on monthly basis. Applicant argued that it was 'continuous supply of services'. Held : It is continuous supply of service, as service is agreed to be provisioned for a period exceeding 3 months.

ToS of Goods/ Services under FCM [Sec 12(2): Goods + Sec 13(2): Services] 7. When does the liability to pay GST arise in respect of supply of goods (attracting GST under FCM)?

(CBIC FAQ) Ans. Section 12 of the CGST/SGST Act provides for time of supply of goods. The time of supply of goods shall be the earlier of the

following namely,

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(i) 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;

or (ii) the date on which the supplier receives the payment with respect to the supply.

However, vide Notification issued in pursuance of powers given by Sec 148 of CGST Act (power to notify persons granting them special procedures under GST), in respect of registered supplier of goods*2 (other than composition supplier) liability to pay tax at the time of receipt of advance has been relaxed. The relaxation is applicable only in respect of normal tax liability and not liability under RCM (reverse charge mechanism).

Note: *1 Legal text Sec 12(2) (ToS for Goods): It contains the reference of section 31(1).

• Issuance of invoice: governing provisions is Sec 31 o Supply of goods (other than continuous supply of goods) – Sec 31(1) provides for invoicing o Supply of goods (continuous supply of goods) – Sec 31(4) provides for invoicing

Sec 12(2) is giving a reference to sec 31(1) only. Unintentionally, reference to invoice issued u/Sec 31(4) is missing. Similarly, in case invoicing is governed by some other

sub-sections of sec 31, reference thereof is also missing. This is unintentional mistake/ omission.

In fact, CGST Act has been amended by CGST Amendment Act, 2018 to take care of this unintended drafting error/mistake. [However, amendment act has presently not been given effect]

.

Discussion for sake of legal clarity

ToS – relevant section

Legal text (red colour strike out is by CGST Amendement Act, 2018)

Reasons of amendment

Sec 12 (2) ToS for Goods

12 (2) The time of supply of goods shall be the earlier of the following dates, namely:— (a) date of issue of invoice by the supplier or the last date on

which he is required under 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

The amendment seeks to correct a drafting error in the earlier law, as the issuance of invoice/other documents are also contained in other sub-sections of section 31.

Sec 13 (2) ToS for Services

13 (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 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 sub-section(2) of section 31 or the date of receipt of payment, whichever is earlier;

The amendment seeks to correct a drafting error as the provisions for issuance of invoices/other documents are also contained in other sub-sections of section 31.

*2 Supplier of goods: Advance no longer to be taxed [Sec 148 read with N/N 66/2017-CT]

• Through route of Sec 148 (CG power to notify special procedure for certain persons), it has been provided that advance will not be taxable in hands of supplier. ToS shall arise only upon issuance of invoice (or last date of issuance of invoice). o Though GST shall not be payable on advances received by supplier of goods, still RECEIPT VOUCHER shall be

raised for advances (as relaxation is only as to payment and not as to documentations) .

8. Explain the meaning of the term “date of receipt of payment” as per section 13 of the CGST Act, 2017.

(CA Inter - RTP - Nov 2018) Ans. “Date of receipt of payment” in terms of section 13 of CGST Act, 2017 refers to the earliest of following 2 dates:

(a) date on which the payment is recorded in the books of account of the supplier of service that receives the payment, or (b) the date on which the payment is credited to the supplier’s bank account,

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[Expected] 9. M/s X Ltd, being a manufacturer, sold goods to M/s Y Ltd., wholesaler, and issued invoice for the sale on 01-08-

20XX. Find the time of supply of goods in each of the following independent cases: (i) M/s X Ltd., removes the goods for delivery to M/s Y Ltd., on 16th August 20XX. (ii) M/s. Y Ltd., collects the goods from premises of M/s X Ltd., on 10th August 20XX. (iii) M/s Y Ltd., made full payment on 26th July 20XX. (iv) M/s Y Ltd., credited the payment in bank account of M/s X Ltd., on 28th July 20XX, M/s X Ltd., recorded the

same as receipts in his books on 3rd August 20XX. The goods were dispatched on 5th August 20XX from the warehouse.

Ans. (i) Given transaction is supply transaction involving movement of goods. Sec 31 requires supplier of goods to issue invoice upto the time of removal of goods. In given case, supplier has removed goods on 16th Aug and issued invoice on 1st Aug, thus he has issued invoice upto time of removal of goods (i.e., 16th Aug, 20XX).

.

As per Sec 12, ToS shall be earlier of following dates: (A) Date of invoice (1st August 20XX) or date on which invoice is required to be issued (16th August 20XX) (B) Date of payment (presumed to be much later date) .

Thus, ToS in this case is 1st Aug, 20XX.

(ii) Given transaction is supply transaction involving movement of goods. Sec 31 requires supplier of goods to issue invoice upto the time of removal of goods which includes even collection of goods by the recipient. In given case, removal of goods has taken place on 10th Aug and invoice has been issued on 1st Aug, thus he has issued invoice upto time of removal of goods (i.e., 10th Aug, 20XX).

.

As per Sec 12, ToS shall be earlier of following dates: (A) Date of invoice (1st August 20XX) or date on which invoice is required to be issued (10th August 20XX) (B) Date of payment (presumed to be much later date) .Thus, ToS in this case is 1st Aug, 20XX.

(iii) Since the payment has been received prior to date of invoice (actual date of issuance or due date of issuance), the ToS shall be date of receipt of payment, i.e., 26th July, 20XX as per provisions of Sec 12.

.

However, CG has issued notification in pursuance of Sec 148 through which it has provided that advances shall not give rise to time of supply for supplier of goods (other than composition supplier). In given case, M/s X being normal supplier, advances will not create ‘time of supply’. Thus, Time of supply shall be the date of invoice or last date of issue of invoice.

(iv) For purposes of determination of ToS, the date of payment is considered to be earlier of the date of receipt of payment in bank account or date of entry in books of accounts. Thus, in instance case, the date of receipt of payment in bank on 28th July, 20XX. Since the date of receipt of payment is prior to date of invoice (actual date of issuance or due date of issuance), the ToS shall be date of receipt of payment, i.e., 28th July, 20XX.

.

However, CG has issued notification in pursuance of Sec 148 through which it has provided that advances shall not give rise to time of supply for supplier of goods (other than composition supplier). In given case, M/s X being normal supplier, advances will not create ‘time of supply’. Thus, Time of supply shall be the date of invoice or last date of issue of invoice.

10. A machine has to be supplied at site. It is done by sourcing various components from vendors and assembling the machine at site. The details of the various events are:

17th September Purchase order with advance of Rs. 50,000 is received for goods worth Rs. 12 lakh and entry duly made in the seller’s books of account

20th October The machine is assembled, tested at site, and accepted by buyer 23rd October Invoice raised 4th November Balance payment of Rs. 11,50,000 received

Determine the time of supply(ies) in the above scenario. (ICAI Study Material)

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Ans. Given transaction is procurement of parts and bringing them directly to site for assembly at customers site. The supply is being effected by direct delivery of assembled goods at customer’s site. Thus, in term of Sec 31, invoicing for such goods is required by the time goods are made available to the recipient, i.e., 20th October in the case before us.

.

As per Sec 12 read with Sec 148, ToS for the supplier of the goods shall be the date of invoice (23rd Oct 2017) or the last date on which invoice is required to be issued (20th Oct). Thus, ToS for the given supply transaction shall be 20th October.

Note: Presently, receipt of advance will not create ToS in the hands of normal supplier (discharging his FCM liability)

11. An order is placed on Ram & Co. on 18th August for supply of a consignment of customised shoes. Ram & Co. gets the consignment ready and informs the customer and issues the invoice on 2nd December. The customer collects the consignment from the premises of Ram & Co. on 7th December and transfer the payment to suppliers’ bank account on the same date, which is entered in the books of accounts on the next day, 8thDecember.

What is the time of supply of the shoes? (ICAI Study Material)

Ans. Given transaction is supply transaction involving movement of goods. Sec 31 requires supplier of goods to issue invoice upto the time of removal of goods which includes even collection of goods by the recipient. In instant case, the supplier has issued invoice upto time of removal of goods (i.e., 7th Dec). For purposes of determination of ToS, the date of payment is considered to be earlier of the date of receipt of payment in bank account or date of entry in books of accounts. Thus, in instance case, the date of receipt of payment is 7th Dec. As per Sec 12 read with Sec 148, ToS for the supplier of the goods shall be the date of invoice (2nd Dec) or the last date on which invoice is required to be issued (7th Dec). Thus, ToS for the given supply transaction shall be 2nd Dec.

Note: In given question, no advance payment is involved. Even otherwise, presently, receipt of advance will not create ToS in the hands of normal supplier (discharging his FCM liability)

12. Mehra Sons, a registered supplier, is a wholesale supplier of ready-made garments located in Bandra, Mumbai.

On 5th September, 20XX, Subhadra, owner of Aura Boutique located in Dadar, Mumbai, approached Mehra Sons for supply of a consignment of customised dresses for ladies and kids.

Mehra Sons gets the consignment ready by 2nd December, 20XX and informs Subhadra about the same. The invoice for the consignment was issued the next day, 3rd December, 20XX.

Due to some reasons, Subhadra could not collect the consignment immediately. So, she collects the consignment from the premises of Mehra Sons on 18th December, 20XX and hands over the cheque for payment on the same date. The said payment is entered in the accounts on 20th December, 20XX and amount is credited in the bank account on 21st December, 20XX.

You are required to determine the time of supply of the readymade garments supplied by Mehra Sons to Subhadra elaborating the relevant provisions under the GST law.

(CA Inter – MTP- May 2018) (CA Inter - MTP - August 2018, 4 Marks) Ans. Given transaction is supply transaction involving movement of goods. Sec 31 requires supplier of goods to issue invoice upto

the time of removal of goods which includes even collection of goods by the recipient. In given case, date of removal (collection by buyer) is 18 Dec while invoicing has been done on 3 Dec. Thus, given case is one where the supplier has issued invoice upto time of removal of goods. For purposes of determination of ToS, the date of payment is considered to be earlier of the date of receipt of payment in bank account (21 dec) or date of entry in books of accounts (20 Dec). Thus, in instance case, the date of receipt of payment is 20th Dec.

As per Sec 12 read with Sec 148, ToS for the supplier of the goods shall be the date of invoice (3rd Dec) or the last date on which invoice is required to be issued (18th Dec). Thus, ToS for the given supply transaction shall be 3rd Dec.

Note: In given question, no advance payment is involved. Even otherwise, presently, receipt of advance does not create ToS in the hands of normal supplier (discharging his FCM liability)

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13. From the following information determine the time of supply of goods where supply involves movement of goods:

No. Invoice date

Removal of goods

Delivery of goods

Receipt of payment

Other Information

1. 16-11-20XX 10-11-20XX 16-11-20XX 16-11-20XX —

2. 01-11-20XX 10-11-20XX 16-11-20XX — Supply is due to Inter-State stock transfer.

3. 22-11-20XX 01-12-20XX 04-12-20XX 20-11-20XX

10-12-20XX

Rs. 5,00,000 is received as advance and invoice for full amount is issued on 22-11-20XX. Balance Rs. 6,20,000 is received on 10-12-20XX.

Ans. As per Sec 12 read with Sec 148, ToS for the supplier of the goods shall be the date of invoice or the last date on which

invoice is required to be issued. Presently, receipt of advance does not create ToS in the hands of normal supplier (discharging his FCM liability)

.

Time of supply of goods in each of the above cases has been given in following table — Actual date of

invoicing Due date (last date) of issue of invoice

DoP ToS = Earlier of actual date of invoice or due date of issue of invoice

1. 16th Nov 10th Nov 16th Nov. 10th Nov. 2. 1st Nov. 10th Nov — 1st Nov. 3. 22nd Nov 1st Dec 20 Nov (5,00,000) ---

10 Dec (6,20,000) 22 Nov (Entire - 11,20,000)

14. Determine the Time of supply in each of the following independent cases in case supply does not involve

movement of goods. No. Date of invoice Date when goods made available to recipient Date of receipt of payment 1. 02-10-20XX 03-10-20XX 15-11-20XX 2. 04-10-20XX 01-10-20XX 25-11-20XX 3. 04-11-20XX 06-11-20XX 01-10-20XX

Ans. As per Sec 12 read with Sec 148, ToS for the supplier of the goods shall be the date of invoice or the last date on which

invoice is required to be issued. Presently, receipt of advance does not create ToS in the hands of normal supplier (discharging his FCM liability)

.

Time of supply of goods in each of the above cases has been given in following table —

Actual date of invoicing

Due date (last date) of issue of invoice

DoP ToS = Earlier of actual date of invoice or due date of issue of invoice

1. 2nd Oct 3rd Oct 15 Nov 2nd Oct

2. 4th Oct 1st Oct 25 Nov 1st Oct

3. 4th Nov 6th Nov 1st Oct 4th Nov

15. M/s Mansh & Vansh Trading Company, a registered supplier, is liable to pay GST under forward charge.

Determine the time of supply from the following information furnished by it – (i) Goods were supplied on 03-10-20XX (ii) Invoice was issued on 05-10-20XX (iii) Payment received on 09-10-20XX.

(CA Inter May 2018 adapted) Ans. Invoice is required to be issued before delivery of goods or removal of goods, as per section 31(1) of CGST Act. Thus, invoice

should have been issued on 3-10-20XX. In the given case, invoice has issued after the expiry of specified period. As per section 12(2) of CGST Act, time of supply is date of invoice or last date on which invoice should have been issued,

whichever is earlier. Hence, time of supply is 3-10-20XX.

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(Imp) 16. If a supplier of goods has received an amount of Rs. 1500/- against an invoice of Rs. 1,100/- on 25.07.XX and

the date of invoice of next supply to the said recipient is 14.08.XX. Find the following in respect of excess amount over and above invoice value: (a) Time of Supply of goods (b) Due date of payment of tax.

(ICMA Study Material) Ans. (a) In given case, supplier has received payment in excess of payment due as per invoice. Receipt of such excess payment

has resulted into receipt of advance in hands of supplier. However, presently, receipt of advance does not create time of supply in hands of supplier (Sec 12(2) read with Sec 148 of CGST Act). Thus, this advance will not give rise to time of supply (irrespective of amount of such advance). Thus, time of supply shall remain date of issue of invoice. Accordingly, such resultant advances shall be taxed only when subsequent supply is made and invoice is issued. Thus, time of supply w.r.t Rs. 400/- shall be 14th Aug (date of invoicing of such supply)

(b) Due date of payment of tax • Time of Supply = 14th Aug • Due date of payment of GST = 20th Sep Author : It shall be noted that following proviso is also there in Sec. 12(2). The proviso provides that where the supplier of taxable goods receives an amount upto Rs 1,000/- 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. However, in view of Sec. 148, this proviso is of no use for normal supplier. The benefit of proviso shall however be availed by Composition Supplier.

17. Company X receives an advance of Rs. 50,000 on 30th April, against which it dispatches goods worth Rs. 49,200

under invoice dated 5th May. Company X has received Rs. 800 in excess, which cannot be considered as payment for the present invoice, in terms of Explanation 1 to section 12(2). Company X will adjust this excess amount against the next supply. What will be time of supply?

(ICAI Study Material) Ans. The time of supply for Rs. 800 can be taken as the date of the next invoice – Sec 12(2) read with Sec 148 18. Investigation shows that 150 cartons of ceramic capacitors were dispatched on 2nd August but no invoice was

made and the cartons were not entered in the accounts. There was no evidence of receipt of payment. What is the time of supply of the 150 cartons?

(ICAI Study Material) Ans. Given transaction is supply transaction involving movement of goods. Sec 31 requires supplier of goods to issue invoice upto

the time of removal of goods. In instant case, the supplier is required to issue invoice upto time of removal of goods (i.e., 2nd Aug). But the supplier has not issued invoice upto time of removal of goods (i.e., 2nd Aug). In this case, date of receipt of payment is not ascertainable.

As per Sec 12 read with Sec 148, ToS for the supplier of the goods shall be the date of invoice (not available- as invoice not raised) or the last date on which invoice is required to be issued (2nd Aug). Thus, ToS for the given supply transaction shall be 2nd Aug.

Author: What if in above illustration, even exact date of removal of goods is also not known, but assessee is admitting to his liability as to 150 cartons? .Now, ToS cannot be determined u/Sec 12(2). In such situation, residuary provisions of Sec 12(5) shall be applicable. • If such supplier is GST registered: ToS = Date on which GST return admitting the liability is to be filed • If such supplier is unregistered: ToS = Date on which GST is paid.

.

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19. When does the liability to pay GST arise in respect of supply of services (attracting GST under FCM)? (CBIC FAQ)

Ans. Section 13 of the CGST/SGST Act provides for time of supply of services. The time of supply of services shall be determined in following manner :

(a) if the invoice is issued within the period prescribed under section 31** : ToS shall be the date of issue of invoice by the supplier or the date of receipt of payment whichever is earlier; or

(b) if the invoice is not issued within the period prescribed under section 31** ToS shall be the date of provision of service, or the date of receipt of payment whichever is earlier.

(c) in case where the provisions of clause (a) and (b) do not apply, ToS shall be the date on which the recipient shows the receipt of services in his books of account.

20. Determine ToS of services in the following cases — DoS Payment entered in Books Payment entered in bank A/c DoI 1. 10/08/20XX 09/09/20XX 06/09/20XX 17/08/20XX 2. 10/08/20XX 10/09/20XX 12/09/20XX 13/09/20XX 3. 10/08/20XX 05/08/20XX 08/08/20XX 17/08/20XX

Ans. The ToS shall be —

DoS DoI DoP = Earlier of entry in books or bank

ToS

1. 10/08/20XX 17/08/2017 (within specified period of 30 days)

06/09/20XX 17/08/20XX [Earlier of date of invoice or date of payment]

2. 10/08/20XX 13/09/20XX (not within specified period of 30 days)

10/09/20XX 10/08/20XX [Earlier of date of completion/provision of service or date of payment]

3. 10/08/20XX 17/08/20XX (within specified period of 30 days)

05/08/20XX 05/08/20XX [Earlier of date of invoice or date of payment]

21. Suppose, part advance payment is made or invoice issued is for part payment, whether the time of supply will

cover the full supply? (CBIC FAQ)

Ans. No. The supply of services shall be deemed to have been made to the extent it is covered by the invoice or the part payment. However, for goods payment of tax will need to be made upon date of issue of invoice, irrespective of the fact whether or not advance or part payment is received.

22. Determine the time of supply from the following particulars:

6th May Booking of convention hall, sum agreed Rs.15000, advance of Rs.3000 received

15th September Function held in convention hall

27th October Invoice issued for Rs.15000, indicating balance of Rs.12000 payable

3th November Balance payment of Rs.12000 received

(ICAI Study Material) Ans. As per section 31, the tax invoice for supply of service shall be issued within 30 days of supply of service. In the given case,

the service has been provided on 15th Sep (the day function was held in convention hall), but invoice was issued on 27th Oct, i.e. after the prescribed time limit of 30 days.

As per section 13(2)(b), in a case where the invoice is not issued within the prescribed time, the time of supply of service is the date of provision of service or receipt of payment, whichever is earlier.

Therefore, the time of supply of service to the extent of Rs. 3,000 is 6th May as the date of payment of Rs. 3000 is earlier than the date of provision of service. The time of supply of service to the extent of the balance Rs. 12,000 is 15th September which is the date of provision of service.

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Author: Taxation of advances • Supplier of goods: Sec 148 has deferred taxation of advances in hands of normal supplier of goods discharging his FCM

liability. • Supplier of services: No relaxation as to taxation of advances.

.

23. Determine the time of supply from the following particulars :

8th September Community hall booked for a marriage, Sum agreed Rs. 1,20,000, Advance Rs. 20,000 recorded in the books of account.

10th September Advance amount credited in bank account. 2nd November Marriage held in the Community Hall, 18th December Invoice issued for Rs. 1,20,000 indicating the balance of Rs. 1,00,000 payable. 22nd December Balance Rs. 1,00,000 recorded in the books of account. 24th December Payment Rs. 1,00,000 credited to the bank account.

(CA Final may 2018 - 4 Marks) Ans. The given transaction is transaction of supply of service of renting of immovable property.

As per details given, service was provided/rendered on 2nd Nov. but invoiced on 18th Dec. Further, an advance of Rs 20,000 was received on 8th Sept.. As per section 31(2) of the CGST Act, 2017 read with rule 47 of CGST Rules, 2017 a tax invoice is to be issued within 30 days of supply of service. In the given case, the invoice is not issued within the prescribed time limit. Thus, it is a case of belated invoicing. Thus, in terms of Sec 13(2) of CGST Act, time of supply of service shall be earliest of following dates: (i) date of provision of service or

(ii) date of payment (where date of payment shall be taken to be earliest of date of recording the payment in the books of account of the supplier or date of crediting of payment in the supplier’s bank account)

ToS for the transaction given (which is a case of belated invoicing) • Receipt of advance to extent of Rs 20,000:

Advance shall be taxable immediately on receipt basis. The time of supply shall be 8th Sep (being earlier of date of recording of advance in books (8 Sep) or date of credit in bank account (10 Sep)). .

• Balance value of Rs 1,00,000: The time of supply of balance value of service shall be date of actual provisioning of service i.e., 2nd Nov (as payment is received much later)

24. Raju Pvt Ltd. receives the order and advance payment on 5th January for carrying out an architectural design

job. It delivers the designs on 23rd April. By oversight, no invoice is issued at that time, and it is issued much later, after the expiry of prescribed period for issue of invoice.

When is the time of supply of service? (ICAI Study Material)

Ans. Since the invoice has not been issued within the prescribed time period, time of supply of service will be the earlier of the following two dates in terms of section 13(2)(b):

• Date of provision of service, or • Date of receipt of payment The payment was received on 5th January and the service was provided on 23rd April. Therefore, the date of payment, i.e., 5th

January is the time of supply of the service in this case.

25. Modern Security Co. provides service of testing of electronic devices. In one case, it tested a batch of devices on 4th and 5th September but could not raise invoice till 19th November because of some dispute about the condition of the devices on return. The payment was made in December.

What is the method to fix the time of supply of the service? (ICAI Study Material)

Ans. The time of supply of services, if the invoice is not issued in time, is the date of payment or the date of provision of service, whichever is earlier as per Section 13(2)(b).

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In this case, the service is provided on 5th September (batch testing activity was done on 4th and 5th as well – testing was completed on 5th Sep.) but not invoiced within the prescribed time limit. Therefore, the date of provision of service, i.e., 5th September, will be the time of supply.

(Important) 26. M/s. BSNL raised a bill of Rs. 1,500 plus tax @18% viz. Rs. 270 for Dec. 20XX on 13-1-20XX. Subscriber paid Rs.

2,000 on 20-1-20XX. The value of services for January 20XX is Rs. 1,600, for which bill is raised on 13-2-20XX and balance amount

(net) is paid on 15-2-20XX. Determine ToS. Ans. Telecom service is a case of continuous supply of services, as period thereof exceeds 3 months (supply contract is not for

limited period supply – it is for long period supply) and, therefore, bill is to be raised on or before each date specified in contract for billing / payment (in this case, it appears to be 13th of next month).

The relevant determinations are —

Case DoI DoP ToS

1. For Dec. 20XX

Services provided (total bill Rs. 1,770)

13-1-20XX 20-1-20XX 13-1-20XX [DoI or DoP, whichever is earlier]

Advance received Rs. 230 (2,000 – 1,770)

— — This advance being result of excess payment by buyer and also not in excess of Rs. 1,000, Telecom Company may opt for its taxation based on invoicing in next period. Presuming company has so opted, ToS for such advances will not arise in Jan, 2019.

2. For January 20XX

Services provided (total bill Rs. 1,600 + tax Rs. 288) (net payment by subscriber = Rs. 1,888 – 230 advance = Rs. 1,658)

13-2-20XX 15-2-20XX 13-2-20XX [ToS for petty advances received in earlier period= DoI for Rs. 230 ToS for balance amount = DoI or DoP, whichever is earlier for balance]

Note: 1. Continuous Supply of Service: - Invoicing as per Sec 31(5) (no concept of 30/45 days of completion of service)

27. Investigation shows that ABC & Co carried out service of cleaning and repairs of tanks in an apartment complex,

for which the Apartment Owners’ Association showed a payment in cash on 4th April to them against work of above description. The dates of the work are not clear from the records of ABC & Co. ABC & Co have not issued invoice or entered the payment in their books of account.

(ICAI Study Material) Ans. The time of supply cannot be determined as per the provisions of clauses (a) and (b) of section 13(2) as neither the invoice

has been issued nor the date of provision of service is available as also the date of receipt of payment in the books of the supplier is also not available. Therefore, the ToS will be determined vide section 13(2)(c) i.e., the date on which the recipient of service shows receipt of the service in his books of account.

Thus, time of supply will be 4th April, the date on which the Apartment Owners’ Association records the receipt of service in its books of account.

Special Case (Goods): ToS in case of GOODS SENT ON APPROVAL 28. From the following information determine the time of supply if goods are supplied on approval basis —

Removal of goods Issue of invoice Accepted by recipient Receipt of payment

1. 01-12-2018 15-12-2018 05-12-2018 25-12-2018

2. 01-12-2018 15-12-2018 15-12-2018 30-12-2018

3. 01-12-2018 25-07-2019 25-07-2019 30-07-2019

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Ans. When goods are sent on approval, then this transaction is not treated as ‘supply’ at that moment. Transaction is treated as supply post acceptance of goods by the consignee. Accordingly, invoice for such supply shall be raised at that point of time. However, Sec 31(7) of CGST Act provides that invoice shall be raised on/before earlier of the time of supply of such goods or 6 months from the date of removal of such goods.

• Thus, in case supplier sends the goods for approval and such goods are not approved by the consignee within 6 months from the date of removal of goods by the supplier, the supplier has to raise the invoice upon expiry of 6 months. Further, the moment such invoice is raised, GST liability will arise as and when the invoice is issued for such goods, time of supply will arise as per Sec 12(2) of CGST Act.

Keeping in mind the above legal provisions, time of supply as per Sec 12 shall be following under the different given situations: Acceptance by

buyer- creating supply

DoI Last date for issue of invoice

6 months from removal

DoP ToS as per Sec 12(2)

1. 5 Dec, 2018 15 Dec, 2018 5 Dec, 2018 1 June, 2019 25 Dec, 2018 5 Dec, 2018

2. 15 Dec, 2018 15 Dec, 2018 15 Dec, 2018 1 June, 2019 30 Dec, 2018 15 Dec, 2018

3. 25 July, 2019 25 July, 2019 25 July, 2019 1 June, 2019 30 July, 2019 1 June, 2019

Special Case (Services): land owner exchanging LDR (land development rights) with Builder in lieu of certain flats to be constructed by builder 29. Mr. A, a land owner, enters into following agreement with PQR Builder:

1) Mr A will transfer development rights to PQR builder enabling PQR Builder to construct residential complex thereon.

2) The residential complex will consist of 25 residential units. 3) In lieu of transfer of development rights, PQR Builder will handover full constructed 10 residential units to Mr A. 4) Rest 15 residential units shall belong to PQR builder who shall be entitled to sell those in the market. Such

flats were sold (entire consideration received in cheque) by builder even before completion of construction thereof.

.

Mention the time of supply of supply transactions involved above. Ans.

Activity Consideration GST Liability Time of Supply Mr A (land owner)

Transfer of development rights

10 complete residential unit

GST payable - This transaction

is supply of service

ToS shall be determined as per Sec 148 of CGST Act read with relevant notification. ToS shall be the date on which builder transfers possession of flat to the land owner (which may be by entering into conveyance deed or by some similar instrument like allotment letter)

PQR (Builder)

Construction (1) 10 units

(handed over to landowner)

Development rights in land

GST payable - This transaction

is supply of service

ToS shall be determined as per Sec 148 of CGST Act read with relevant notification. ToS shall be the date on which builder transfers possession of flat to the land owner (which may be by entering into conveyance deed or by some similar instrument like allotment letter)

(2) 15 units (sold in open market)

Money GST payable - This transaction

is supply of service

ToS shall be determined as per Sec 13(2) of CGST Act.

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Note: 1. Supply of Service (cross supply of services by landowner and Builder/developer/construction company/other registered person)

Sec 148 has provided a special procedure for payment of tax. As per notification issued in pursuance of Sec 148, ToS shall be transfer of possession or rights in the constructed complex, building or civil structure to the person supplying development rights.

ToS of Goods/ Services under RCM - [Sec 12(3): Goods + Sec 13(3): Services] 30. What is the time of supply of goods in case of tax payable under reverse charge?

(CBIC FAQ) Ans. The time of supply will be the earliest of the following dates: a) date of receipt of goods; or b) date on which payment is made; or c) the date immediately following 30 days from the date of issue of invoice by the supplier (i.e., 31st Day) 31. What is the time of supply of service in case of tax payable under reverse charge?

(CBIC FAQ) Ans. The time of supply will be the earlier of the following dates: a) date on which payment is made; or b) the date immediately following 60 days from the date of issue of invoice by the supplier (i.e., 61st Day) 32. East West Ltd., availed service (taxable under reverse charge) from Mr. Dayanand & received an invoice from

him for Rs. 5.2 lakhs for services provided for December 20XX on 31-12-20XX. The amount was paid to Mr. Dayanand on 01-06-20XX by the company. What is the time of supply ?

(Nov. 2017, 4 Marks) Ans. As per section 13(3), in case of reverse charge, Time of Supply shall be earlier of : (a) DoP : 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; i.e. 1-6-20XX, or, (b) DoI + 60 days : date immediately following 60 days from date of issue of invoice or any other document, by whatever

name called in lieu thereof by supplier = date immediately following (31-12-XX + 60 days) = 02-03-20XX whichever is earlier = 02-03-20XX. It will form part of inward supplies of March, 20XX and accordingly, tax would be

payable in April, 20XX. 33. Mr. A, a registered person received goods (i.e. Beedi leaves) from Mr. B, an unregistered dealer. Mr. B issues

invoice on 1st July 20XX. Find the time of supply of goods in following independent cases: (i) Mr. A received goods on 15th July 20XX, payment of which is not made yet. (ii) Mr. A received goods on 3rd August 20XX & made payment for the same on 4th August 20XX. (iii) Mr. A made payment on 8th July 20XX and received goods on the same date. (iv) Mr. A received goods on 10th July 20XX & made payment for the same on 9th July 20XX.

(CMA Final - RTP - Dec 2018) Ans. (i) Time of supply of goods = 15-07-20XX Earliest of the following:

Receipt of Goods 15-07-20XX Date of Payment not paid Dt. immediately following 30 days from the date of invoice 01-08-20XX

(ii) Time of supply of goods = 01-08-20XX Earliest of the following:

Receipt of Goods 03-08-20XX Date of Payment 04-08-20XX Dt. immediately following 30 days from the date of invoice 01-08-20XX

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(iii) Time of supply of goods = 08-07-20XX Earliest of the following:

Receipt of Goods 08-07-20XX Date of Payment 08-07-20XX Dt. immediately following 30 days from the date of invoice 01-08-20XX

(iv) Time of supply of goods = 09-07-20XX Earliest of the following:

Receipt of Goods 10-07-20XX Date of Payment 09-07-20XX Dt. immediately following 30 days from the date of invoice 01-08-20XX

34. Determine the time of supply from the given information.

May 4 Supplier invoices goods taxable on reverse charge basis to Pillar & Co. (30 days from the date of issuance of invoice elapse on June 3)

June 12 Pillar & Co receives the goods, which were held up in transit July 3 Payment made for the goods

(ICAI Study Material) Ans.

Date of receipt of goods

Date of payment by recipient of goods

Date of issue of invoice by supplier of goods

Date immediately following 30 days from date of invoice

Time of supply of goods [Earlier of (1), (2) & (4)]

(1) (2) (3) (4) (5) June 12 July 3 May 4 4 June 4 June

35. Determine the time of supply in the following cases assuming that GST is payable under reverse charge:

Date of receipt of goods

Date of payment by recipient of goods Date of issue of invoice by supplier of goods

(1) (2) (3) (i) July 1 August 10 June 29 (ii) July 1 June 25 June 29 (iii) July 1 Part payment made on June 30 and balance amount

paid on July 20 June 29

(iv) July 5 Payment is entered in the books of account on June 28 and debited in recipient’s bank account on June 30

June 1

(v) July 1 Payment is entered in the books of account on June 30 and debited in recipient’s bank account on June 26

June 29

(vi) August 1 August 10 June 29 (ICAI Study Material)

Ans. Date of

receipt of goods

Date of payment by recipient of goods

Date of issue of invoice by supplier of goods

Date immediately following 30 days from date of invoice

Time of supply of goods [Earlier of (1), (2) & (4)]

(1) (2) (3) (4) (5) (i) July 1 August 10 June 29 July 30* July 1 (ii) July 1 June 25 June 29 July 30 June 25 (iii) July 1 Part payment made on June 30 and

balance amount paid on July 20 June 29 July 30 June 30 for part

payment made and July 1 for balance amount

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(iv) July 5 Payment is entered in the books of account on June 28 and debited in recipient’s bank account on June 30

June 1 July 2 June 28 (i.e., when payment is entered in the books of account of the recipient)

(v) July 1 Payment is entered in the books of account on June 30 and debited in recipient’s bank account on June 26

June 29 July 30 June 26 (i.e., when payment is debited in the recipient’s bank account)

(vi) August 1 August 10 June 29 July 30 July 30 (i.e., 31st day from issuance of invoice)

*Taking date as July 29 is incorrect : For computation of ToS u/s 12(3), the date on which invoice is drawn (DoI) has to be excluded. Hence, period of 30 days would start from June 30 and end on July 29. This is also held in Rameshchandra Ambalal Joshi v. State of Gujarat [2014] 48 taxmann.com 246 (SC) that (in the matter of cheques), the date on which cheque is drawn is to be excluded. Even otherwise, if law gives '1 day' from date of invoice and date of invoice is June 29, then, '1 day' therefrom would be June 30. Extrapolating it to 30 days, 30 days from June 29 would be July 29 and not July 28. The date immediately following July 29 is July 30.

36. Kabira Industries Ltd engaged the services of a transporter for road transport of a consignment on 17th June and made advance payment for the transport on the same date, i.e., 17th June. However, the consignment could not be sent immediately on account of a strike in the factory, and instead was sent on 20th July. Invoice was received from the transporter on 22nd July.

What is the time of supply of the transporter’s service? Note: Transporter’s service is taxed on reverse charge basis.

(ICAI Study Material) Ans. Time of supply of service taxable under reverse charge is the earlier of the following two dates in terms of section 13(3)(a): • Date of payment • 61st day from the date of issue of invoice In this case, the date of payment precedes 61st day from the date of issue of invoice by the supplier of service. Hence, the date

of payment, that is 17th June, will be treated as the time of supply of service.

37. A firm of lawyers issues invoice for services to ABC Ltd. on 17th Feb. The payment is contested by ABC Ltd. on the ground that on account of negligence of the firm, the company’s case was dismissed by the Court for non-appearance, which necessitated further appearance for which the firm is billing the company. The dispute drags on and finally payment is made on 3rd November.

Identify the time of supply of the legal services. Note: Legal services are taxable on reverse charge basis.

(ICAI Study Material) Ans. Time of supply of services that are taxable under reverse charge is earliest of the following two dates in terms of section

13(3)(a): • Date of payment [3rd November] • 61st day from the date of issue of invoice [19th April] The date of payment comes subsequent to the 61st day from the issue of invoice by the supplier of service. Therefore, the 61st

day from supplier’s invoice has to be taken as the time of supply. This fixes 19th April as the time of supply. 38. Determine the time of supply in the following cases assuming that GST is payable under reverse charge:

S.No. Date of payment by recipient for supply of services Date of issue of invoice by supplier of services

(1) (2) (i) August 10 June 29 (ii) August 10 June 1 (iii) Part payment made on June 30 and balance amount paid on September 1 June 29 (iv) Payment is entered in the books of account on June 28 and debited in

recipient’s bank account on June 30 June 1

(v) Payment is entered in the books of account of June 30 and debited in recipient’s bank account on June 26

June 29

(ICAI Study Material)

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Ans.

S.No. Date of payment by recipient for supply of services

Date of issue of invoice by supplier of services

Date immediately following 60 days from invoice

Time of supply of goods [Earlier of (1) & (3)]

(1) (2) (3) (4)

(i) August 10 June 29 August 29 August 10

(ii) August 10 June 1 August 1 August 1

(iii) Part payment made on June 30 and balance amount paid on September 1

June 29 August 29 June 30 for part payment and August 29 for balance amount

(iv) Payment is entered in the books of account on June 28 and debited in recipient’s bank account on June 30

June 1 August 1 June 28 (i.e. when payment is entered in the books of account of the recipient)

(v) Payment is entered in the books of account of June 30 and debited in recipient’s bank account on June 26

June 29 August 29 June 26 (i.e. when payment is debited in the recipient’s bank account)

39. Royal Sweet Co., Delhi, a registered supplier, has furnished the details of the following few transactions which took place in November, 20XX :

S. No.

Particulars Date of payment

Date of invoice

Amount (Rs.)

(i) Payment made to an advocate in Delhi 11.11.20XX 07.07.20XX 1,25,000

(ii) Paid sitting fee to Director from Haryana for meeting held in Delhi on 15.10.20XX

[Inter-State supply]

20.11.20XX 15.10.20XX 75,000

Assume the rates of taxes to be as under : Particulars Rate CGST 9% SGST 9% IGST 18%

Royal sweet is going to discharge GST on above supplies alongwith his GST liability on its outward supplies for Oct month. The actual date of payment of GST is 18th Nov, 20XX. Determine GST payable alongwith interest, if any.

(CA Inter - RTP -May 2018- Adapted) Ans. Computation of GST payable for the month of Oct, 20XX

S. No.

Particulars Time of supply of services

CGST (Rs.) SGST (Rs.) IGST (Rs.) Interest (Rs.)

(i) Services from an advocate in Delhi

06.09.20XX [Note-1 & 3]

11,250 11,250 - 321 [Note-4]

(ii) Director’s siting fee 20.11.20XX [Note – 2 & 3]

— — 13,500

Notes:- 1. Services supplied by an individual advocate to any business entity located in the taxable territory is a notified service

on which tax is payable on reverse charge basis by the recipient of services. 2. Services supplied by a director of a company to the said company is a notified service on which tax is payable on

reverse charge basis by the recipient of services. 3. As per section 13 of the CGST Act, 2017, the time of supply of services in case of reverse charge is earliest of the following:

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(a) Date of payment as entered in the books of account of the recipient or the date on which the payment is debited to his bank account, whichever is earlier, or

(b) Date immediately following 60 days since the date of issue of invoice. Provisions of time of supply as provided under section 13 of the CGST Act are also applicable for inter-State supply vide section 20 of the IGST Act.

In view of the aforesaid provisions, time of supply and due date for payment of tax in the given cases would be determine as under :

Date of payment by recipient for supply of services

Date of issue of invoice by supplier of services

Date immediately following 60 days from invoice

Time of supply of goods [Earlier of (1) & (3)]

(1) (2) (3) (4)

Legal Sr 11 Nov 7 July 6 Sep 6 Sep

Director Sr 20 Nov 15 Oct 15 Dec 20 Nov

4. GST liability on legal services should have been discharged earlier, now payable with interest

a. ToS of RCM liability on legal services = 6 Sep b. Due date of payment of RCM liability = 20 Oct c. Actual discharge of this RCM liability = 18 Nov d. Interest payable alongwith = Interest @18% p.a. is payable for 29 days of delay (11 days of Oct + 18 days

of Nov) e. GST payable = 1,25,000 * 18% = Rs. 22,500 f. Interest payable = 22,500 * 18% * 29/365 = Rs. 321 (rounded off)

(In case of delayed payment of tax, interest @18% per annum is payable for the period for which the tax remains unpaid starting from the day succeeding the day on which such tax was due to be paid [Section 50 of the CGST Act, 2017 read with relevant notification])

5. GST liability on director services to be discharged later a. ToS of RCM liability on director’s services = 20 Nov b. Due date of payment of RCM liability = 20 Dec

40. On 4th September, 2017, V.R. Mehman a famous music composer, received Rs. 3 crore of consideration from

Zilmil Music Co. Ltd. for grant of copyright of his original music album. He finished his work & made available the CD to the music company on 20th July, 2017 & raised the invoice on 24th July, 2017. What will be time of supply as per CGST Act, 2017?

Note : Above Service is taxable under reverse charge basis. (CA Inter May 2018 adapted)

Ans. 4-9-2017 as payment was made within the date immediately following sixty days from the date of issue of invoice by the supplier.

41. Determine the time of supply from the given information.

May 4 A German company issues email informing its associated company ABC Ltd. of the cost of technical services provided to it.

July 2 ABC Ltd transfers the amount to the account of the German company

(ICAI Study Material) Ans. As there is no prior entry of the amount in the books of account of ABC Ltd., July 2 will be the time of supply, being the date

of payment in terms of second proviso to section 13(3).

42. X Ltd. & Y Ltd. (London) is ASSOCIATED ENTERPRISES. X Ltd., a registered firm received the services of Y Ltd., a unregistered firm. Determine the time of supply in following cases:

(i) X Ltd. recorded the liability in the books on 15th July 2017 and payment will be made in the next month. (ii) X Ltd. made advance payment to Y Ltd. on 10th July and recorded liability in the books on 15th Aug 2017. Ans. In case of service transaction from associated enterprises (overseas transaction), ToS is earlier of following two:

(a) Date on which transaction is recorded in books of accounts of the recipient; (b) Date of payment:

.

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Accordingly, ToS in given transactions shall be (i) Time of supply =15-07-2017

Note: as the date of entry in the books is prior to the date of payment. (ii) Time of supply = 10-07-2017 Note: as the payment is made earlier to the date of entry in the books.

JUST FOR KNOWLEDGE: Sec 2 (12) Associated Enterprise “Associated Enterprise” shall have the same meaning as assigned to it in Sec 92-A of the Income tax Act, 1961.

Author :

Section 92-A of the Income Tax Act, 1961 Associated Enterprise means:

1. An enterprise, which participates, directly or indirectly, or through one or more intermediaries, in the management or control or capital of the other enterprise; or

.

2. An enterprise in respect of which one or more persons who participate, directly or indirectly, or through one or more intermediaries, in its management or control or capital, are the same persons who participate, directly or indirectly, or through one or more intermediaries, in the management or control or capital of the other enterprise.

Note: The Income-tax Act provides detailed list of circumstances when an enterprise is said to participate in management or control or capital of other enterprise and when same set of persons can be said to participate in management or control or capital of other enterprise.

Examples of associated enterprise 1. A Limited holds 100 percent shares of B Limited. A Limited also holds 20 percent shares of C Limited. B Limited holds 10

percent shares of C Limited. Here A Limited holds, directly and indirectly not less than twenty-six percent of voting power in C Limited. A Limited and C Limited are associated enterprises.

.

2. A Limited holds not less than twenty-six per cent of the voting powers in D Limited and E Limited. A Limited, D Limited and E Limited are associated enterprises.

.

3. Mr. A has a business of manufacture and sale of jewellery. Mrs. A has separate business of manufacture and sale of furniture. As two businesses are controlled by an individual and his relative, both enterprises are associated enterprises. Different line of business is of no consequence.

.

4. XYZ Limited is manufacturing soft-drink concentrates. They have entered into contracts with several bottlers for converting concentrate in drink through a process amounting of manufacture. The bottler is wholly dependent on the use of know-how, patents, copyrights, trade-marks, licenses, specification and secret formula of XYZ Limited. Both these enterprises are associated enterprises.

The concept of ‘associated enterprise’ is relevant only for the purpose of determining time of supply of receipt of services where supplier is located out of India.

ToS of Goods/ Services: in case of VOUCHERS - [Sec 12(4): Goods + Sec 13(4): Services] 43. What is time of supply in case of supply of vouchers in respect of goods and services?

(CBIC FAQ) Ans. The time of supply of voucher in respect of goods and services 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.

44. Acme sales Limited sells food coupons to a company, which gives these to its employees as part of the agreed perquisites. The coupons can be redeemed for purchase of any item of food /provisions in the outlets that are part of the program. What will be time of supply?

(ICAI Study Material) Ans. As per section 12(4) of CGST Act, 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. As the supply against which the coupon will be redeemed is not known on the date of the sale of the coupon, the time of supply

of the coupon will be the date on which the employee redeems it against food / provision items of his choice.

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45. With each purchase of a large pizza during the Christmas week from Perfect Pizza, one can buy a voucher for Rs. 20 which will be redeemable till 5 Jan for a small pizza. What will be time of supply?

(ICAI Study Material) Ans. As per section 13(4) of CGST Act, 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. As the supply against which the voucher will be redeemed is known on the date of the sale, the time of supply is the date of

issue of the voucher. Note : Supply by Perfect Pizza = Supply of Restaurant Service

46. Best Hospitality Services enters into agreement with Drive Marketing Ltd by which Drive Marketing Ltd. markets

Best Hospitality Services’ hotel rooms and sells coupons / vouchers redeemable for a discount against stay in the hotel. What will be time of supply?

(ICAI Study Material) Ans. As per section 13 (4) of CGST Act, 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. As the supply against which the voucher will be redeemed is identifiable, the time of supply of the voucher will be its date of issue.

47. Sodexo meal coupons are sold to a company on 9th August for being distributed to the employees of the said company. The coupons are valid for six months and can be used against purchase of food items. The employees use them in various stores for purchases of various edible items on different dates throughout the six months.

What is the time of supply of the coupons? (ICAI Study Material) (CA Inter - MTP - October 2018, 4 Marks)

Ans. As the coupons can be used for a variety of food items, which are taxed at different rates, the supply cannot be identified at the time of purchase of the coupons. Therefore, the time of supply of the coupons is the date of their redemption in terms of section 12(4).

ToS of Goods/ Services : Residuary Cases - [Sec 12(5): Goods + Sec 13(5): Services] 48. Where it is not possible to determine the time of supply in terms of sub-section (2), (3), (4) of Section 12 or that

of Section 13 of CGST/SGST Act, how will time of supply be determined? (CBIC FAQ)

Ans. There is a residual entry in Section 12(5) as well as 13 (5) which provides that if periodical return has to be filed, then the due date of filing of such periodical return shall be the time of supply. In other cases, it will be the date on which the GST is actually paid.

49. An income-tax and money laundering case against Mr. XYZ, working in a multi-national company, reveals a large volume of undisclosed assets, which he claims as service income. On this basis, the GST authorities investigate the GST liability. Dates of provision of service, whether in the first half or the second half of the financial year being scrutinized by income-tax authorities, are not known. Mr. XYZ voluntarily pays GST during the investigation.

What is the time of supply of the services? (ICAI Study Material)

Ans. Where it is not possible to determine the time of supply in terms of date of invoice or date of provision of service or date of receipt of payment or date of receipt of services in the books of account of the recipient, and where periodical return is not to be filed (Mr. XYZ, being an employee in a multi-national company, is not a registered person), the date of payment of tax is taken as the time of supply [Section 13(5)(b)].

Therefore, the date when Mr. XYZ pays the GST will be the time of supply.

Note: 1. Date of payment being the time of supply, no interest shall be payable in such scenario. 2. Discharge of liability without interest does not seems to be a logical proposition. Application of residuary provisions shall be

clarified by Department by way of illustration. .

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ToS of Goods/ Services: Value addition by way of receipt of interest, penalty or late fee - [Sec 12(6): Goods + Sec 13(6): Services]

50. What is the time of supply applicable with regard to addition in the value by way of interest, late fee or penalty for any delayed payment of consideration?

(CBIC FAQ) Ans. The time of supply with regard to an addition in value on account of interest, late fee or penalty for delayed payment of any

consideration shall be the date on which the supplier receives such additional consideration. 51. Mr. P supplied goods for the value of Rs. 10,000 to its customer Miss Prem on 01.01.20XX on the condition that

payment for the same will be made within a week. However, Miss Prem made payment for the said goods on 02.02.20XX and thus paid interest amounting to Rs. 500. What is the time of supply with regard to addition in the value by way of interest in lieu of delayed payment of consideration?

(Test Series Final May 2018) Ans. As per section 12(6) of CGST Act, 2017, the time of supply with regard to an addition in value on account of interest, late fee

or penalty for delayed payment of consideration (IPL) shall be the date on which the supplier receives such value addition of supply.

Thus, time of supply in respect of interest would be the date on which the supplier has received such additional consideration, i.e. 02.02.20XX. Further, Mr. P is required to make GST payment on or before 20th of March, 20XX.

Comprehensive Illustrations 52. M/s. Pradyumn Corporation Pvt. Ltd., a registered dealer of Mumbai furnishes you following information for the

month of October, 20XX – (i) Intra-State sale of Taxable goods (out of above, Rs. 50,000 was received as advance in September, 2017)

– Rs. 2,00,000 (ii) Goods purchased from unregistered dealer (purchase on 20th October, 20XX) (Rs. 10,000 in case of Inter-

State & Balance Intra-State) – Rs. 50,000 (iii) Received for services by way of labour contracts for repairing a single residential unit (it is Intra-State

transaction) – Rs. 50,000 (iv) Professional fees paid to Ms. Udadhi located in a non-taxable territory (it amounts to Inter-State

transaction) – Rs. 50,000. Compute GST liability (CGST, SGST or IGST, as the case may be) of M/s. Pradyumn Corporation Pvt. Ltd. for the month of October, 20XX. Assume the rates of GST as under – CGST 9%, SGST 9%, IGST – 18%. Note: Turnover of M/s. Pradyumn Corporation Pvt. Ltd. was Rs. 2 crore in the previous Financial Year.

(CA Inter May 2018 adapted) Ans. The taxability is as follows —

Description CGST (Rs.) SGST (Rs.) IGST (Rs.)

(i) Intra-State sale of Taxable goods (out of above, Rs. 50,000 was received as advance in September, 2017) – Rs. 2,00,000 [no tax was payable when advance on goods was received]

18,000 18,000 -

(ii) Goods purchased from unregistered dealer (purchase on 20th October, 20XX (Rs. 10,000 in case of Inter-State & Balance Intra-State) – Rs. 50,000 – RCM applicable, but presently GST exempted on such supplies

- - -

(iii) Received for services by way of labour contracts for repairing a single residential unit (it is Intra-State transaction) – Rs. 50,000

4,500 4,500 -

(iv) Professional fees paid to Ms. Udadhi located in a non taxable territory (it amounts to Inter-State transaction) – Rs. 50,000 – tax payable under reverse charge

- - 9,000

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SPECIAL ToS: ToS of Goods/ Services: if rate changes in-between 53. Is there any change in time of supply, where supply is completed prior to or after change in rate of tax?

(CBIC FAQ) Ans. Yes. In such cases provisions of Section 14 will apply.

** Summary Table of Sec 14 Sec 14(a)

Supply of G/S (DoS) ToS i) ---

Date

of Change (DoC)

DoI DoP

Earlier of [DoI, DoP]*

ii) DoI

DoP DoI

iii) DoP

DoI DoP*

Sec 14(b) Supply of G/S (DoS) ToS i) DoI

Date

of Change (DoC)

DoP

DoP*

ii) DoI DoP

-- Earlier of [DoI, DoP]*

iii) DoP

DoI DoI .

** normal supplier of goods :: GST shall be payable only upon invoicing [Sec 14 read with N/N 66/2017-CT]

54. What is the time of supply, where supply is completed prior to change in rate of tax? [FAQ issued by NACIN (Dec 2018)]

Ans. In such cases time of supply will be (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; (However, for supply of goods, payment of tax need to be made only at the time of issue of invoice in terms of Sec 148 read with N/N 66/2017- CT)

(ii) where the invoice has been issued prior to change in rate of tax but the payment is received after the change in rate of tax, the time of supply shall be the date of issue of invoice;

(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; (However for supply of goods, payment of tax need to be made only at the time of issue of invoice in terms of Sec 148 read with N/N 66/2017- CT)

** Author Sec 148 read with N/N 66/2017-CT In exercise of the powers conferred by section 148 of the CGST Act, 2017 (hereafter in this notification referred to as the said Act), the CG, on the recommendations of the Council, hereby notifies the registered person who did not opt for the composition levy under section 10 of the said Act as the class of persons who shall pay the central tax on the outward supply of goods at the time of supply as per section 12(2)(a) of the said Act including in the situations attracting the provisions of section 14 of the said Act, and shall accordingly furnish the details and returns and the period prescribed for the payment of tax by such class of registered persons shall be such as specified in the said Act. .

** Even in cases where ToS is to be determined as per Sec 14 of CGST Act (i.e., rate change situation), Advances will be non-taxable for normal supplier of goods while discharging his FCM liability.

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55. What is the time of supply, where supply is completed after the change in rate of tax? [FAQ issued by NACIN (Dec 2018)]

Ans. In such cases time of supply will be (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; (However for supply of goods, payment of tax need to be made only at the time of issue of invoice in terms of Sec 148 read with N/N 66/2017- CT)

(ii) where the invoice has been issued and the 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; (However for supply of goods, payment of tax need to be made only at the time of issue of invoice in terms of Sec 148 read with N/N 66/2017- CT)

(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

Supplies of SERVICES with situation involving change in rate of tax 56. There was increase in tax rate from 18% to 20% w.e.f. 1.9.20XX. What is the tax rate applicable when SERVICES

provided and invoice issued before change in rate, but payment received after change in rate ? (CBIC FAQ)

Ans. ToS as per provisions of Sec 14 shall be ‘date of Invoice’. Thus, the old rate of 18% shall be applicable.

57. There was increase in tax rate from 18% to 20% w.e.f. 1.9.2017. What is the tax rate applicable when SERVICES were provided and invoice issued after change in rate, but full advance payment was already received in July, 2017?

(CBIC FAQ) Ans. ToS as per provisions of Sec 14 shall be ‘date of Invoice’. Thus, the new rate of 20% shall be applicable. 58. For the supplier of service, determine the time of supply in the following cases assuming that rate of GST changes

from 18% to 20% w.e.f. June 1, 20XX: S.No. Date of supply of services Date of issue of invoice Date of recipient of payment (i)

May 28 June 9 July 25

(ii) May 28 July 25 (iii) June 9 May 26 (iv)

June 10 May 28 June 25

(v) May 28 May 16 (vi) June 9 May 28

(ICAI Study Material) Ans.

S.No. Date of supply of services

Date of issue of invoice

Date of recipient of payment

Time of supply Applicable rate

(i) May 28

June 9 July 25 June 9 20% (ii) May 28 July 25 May 28 18% (iii) June 9 May 26 May 26 18% (iv)

June 10 May 28 June 25 June 25 20%

(v) May 28 May 16 May 16 18% (vi) June 9 May 28 June 9 20%

59. An interior decorator designs and renovates the office of XYZ in June. The invoice is to be raised after approval of the work. In the meantime, the rate of tax is changed on 5th July. Invoice is raised and payment made later in July. What will be time of supply?

(ICAI Study Material) Ans. As per section 14 of CGST Act, in case the goods or services or both have been supplied before the change in rate of tax and

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.

Here, the time of supply is after the change in rate of tax, though the service was completed prior to the change in rate of tax.

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60. An online portal, Best Info, raises invoice for database access on 21st February on Roy & Bansal Ltd. The payment is made by Roy & Bansal Ltd. by a demand draft sent on 25th February, which is received and entered in the accounts of Best Info on 28th February. Best Info encashes the demand draft and thereafter, gives access to the database to Roy & Bansal Ltd from 3rd March. In the meanwhile, the rate of tax is changed from 1st March.

What is the time of supply of the service of database access by Best Info? (ICAI Study Material)

Ans. As issuance of invoice and receipt of payment (entry of the payment in Best Info’s accounts) occurred before the change in rate of tax, the time of supply of service by the online portal is earlier of the date of issuance of invoice (21st February) or date of receipt of payment (28th February) i.e., 21st February. This would be so even though the service commences after the change in rate of tax [Section 14(b)(ii)]. Thus time of supply is 21st February.

Supplies of GOODS with situation involving change in rate of tax 61. I buy a set of modular furniture from a retail store. Invoice is issued to me and I make the payment. The furniture

is to be delivered to me later in the week when a technician is available to assemble and install it. The next day the rate of tax applicable to modular furniture is revised upward, and the store sends me a supplementary invoice with a note accompanying the furniture to collect the differential amount of tax.

Is this correct on store’s part? (ICAI Study Material)

Ans. No the store is not correct in issuing supplementary invoice with revised rate of tax. The revised rate of tax is not applicable to the transaction, as the issuance of invoice as well as receipt of payment occurred before the supply. Therefore, in terms of section 14(b)(ii), the time of supply is earlier of the two events namely, issuance of invoice or receipt of payment, both of which are before the change in rate of tax, and thus, the old rate of tax remains applicable.

62. Vulcan Tools Pvt Ltd makes custom-made precision tools for which it takes the full advance with the purchase order. One such order is received on 13th April, and full amount paid with the order. The tools are manufactured and delivered on 21st May. Tools of this description get exempted from GST on 25th May. Vulcan Tools has not yet raised the invoice for the tools.

(ICAI Study Material) Ans. As per section 14 of CGST Act, in case the goods or services or both have been supplied before the change in rate of tax and

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.

Here, the time of supply is before the exemption i.e. 13th April and therefore, Vulcan Tools will have to pay GST on the tools.

Reconing date of payment in case of special situations envisaged u/Sec 14

63. Rate of tax is changed on 10th July. Receipt of payment is recorded in the books of account of the supplier on 8th July. The payment is credited in the supplier’s bank account on 15th July. The Bank was open all days between 10th and 15th July. What will be date of receipt of payment?

(ICAI Study Material) Ans. As per proviso to section 14, 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. In the given case the amount is credited after 4 days, thus the date of receipt of payment is 15th July for the given transaction.

64. An assessee (supplier of services) provides you with following data — • Service was exempted upto 30-9-20XX and exemption withdrawn from 1-10-20XX, • Date of provision of services = 1-10-20XX • Date of issue of invoice = 30-9-20XX • Payment thereof is received by way of account payee draft on = 30-9-20XX. • Draft is banked on 6-10-20XX and credited to bank account on = 7-10-20XX. Determine GST, if any, payable @18%, if the value of services is Rs. 5 lakh. Banking holidays were 2-10-20XX and 5-10-20XX.

Ans. In this case, — 1. DoC (Date of change in rate of tax by withdrawal of exemption) is 1-10-20XX, which falls between —

• DoPE (Date of payment entered in books) i.e., 30-9-20XX and • DoPB (Date of payment credit in bank) 7-10-20XX;

2. Payment is received by banking instrument (Account Payee Draft);

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3. but, DoPB is 7-10-20XX, which is within 4 working days from DoC 1-10-20XX [4 working days from DoC are = 3rd, 4th, 6th and 7th October 20XX];

Hence, DoP = DoPB or DoPE, whichever is earlier = 30-9-20XX. Since both DoP (30-9-20XX) and DoI (30-9-20XX) are prior to DoC, hence, as per section 14 of the Central Goods and Services Tax (CGST) Act, ToS = DoP or DoI, whichever is earlier = 30-9-20XX. GST would not be leviable.

Change in rate of tax : What will be your answer in the preceding illustration if draft is credited in bank on 8-10-20XX ? In this case, — 1. DoC (Date of change in rate of tax by withdrawal of exemption) is 1-10-20XX, which falls between —

• DoPE (Date of payment entered in books) i.e., 30-9-20XX and • DoPB (Date of payment credit in bank) 08-10-20XX;

2. Payment is received by banking instrument (Account Payee Draft); 3. DoPB is 8-10-20XX, which is after 4 working days from DoC 1-10-20XX [4 working days from DoC are = 3rd, 4th, 6th and 7th October

20XX]; Hence, DoP = DoPB = 8-10-20XX Since DoS (1-10-20XX) and DoP (8-10-20XX) both fall on or after DoC, hence, as per section 14 of Central Goods and Service Tax (CGST) Act, ToS = DoP = 8-10-20XX. GST = Rs. 5 lakh × 18% = Rs. 90,000.