GST, one of the most revolutionize taxation reforms in the history of Indian economy has brought various positive changes ever since from its implementation.
GST has subsumed all the indirect taxes which were previously levied under the service tax regime. Due to this, the taxation process becomes simple, and all country is now covered under one nation- one tax system.
Among many changed provisions under GST, one of the important changes that took place with the implementation of the unified taxation system is the concept of the Point of Taxation.
The Point of Taxation denotes the point in time when the supplies of goods and services considered fulfilled and the tax liability can be determined. Sometimes it’s often-called Time of Supply.
What is Time of Supply?
Often referred as the point of taxation, the concept of time of supply under GST tells us about the time when goods and or services are deemed provided. At that moment the liability to pay the taxes would arise.
To simply put, as soon as the time of supply occurred, supplier starts discharging all his GST liabilities.
This concept enables the seller to know the time of the supply of goods and or services. It helps the seller to calculate the due date for the payment of taxes. It also helps the one to determine if the supplies have been made or not.
One more provision that GST brought under the concept of time of supply is that the advance payment received for the supply of goods will be considered as taxable.
How Point of Taxation Calculated in Pre- GST Era?
The provision was not there in the previous taxation system. Earlier in the pre-GST era, the calculation of point of taxation was different in different type of tax. For e.g.: In the case of manufacturing of goods, the tax liability arises at the time of removal of goods from factory or from excise unit.
In the case of services, the point of taxation arises on the date of issue of invoices or the date of receipt of payment whichever among the two is earlier.
And in the case of sale of goods the tax liability arises on the sale of goods with both interstate CST and VAT.
How Time of Supply Calculated in GST Regime?
With the implementation of GST, many taxation systems have been simplified. In this series, the concept of the time of supply has also been simplified. The calculation of time of supply is based on the various types of transactions.
Following are the transaction under which you can calculate the time of supply under GST:
A. Calculation of Time of Supply of Goods
Tax liability on goods will be calculated prior to the following dates:
- 1. Time of supply will be calculated before the date of issue of an invoice or at the last date of the issue of the invoice.
- 2. It must be earlier from the date on which the vendor receives the payments.
B. Calculation of Time of Supplies of Services
Time of supply will be earlier of the following three cases:
- 1.A. Earliest of the date of issue of the invoice.
- 1.B. Earliest of the date of receipt of advance/payment. (When the invoice is issued in prescribed period)
- 2. Earliest of the date of provision of services (When the invoice is issued “Not” within a prescribed period)
- 3. Earliest of the date on which receiver mention the receipt in account books. (When none of the above two situations applied)
C. Calculation of Time of Supply with Supply for Voucher
The time of supply is calculated in the following two ways in case of supply for vouchers:
- 1. If there is a single purpose voucher and if the supply can be recognized at the point then the time of supply for a voucher is calculated on the date of issue of a voucher.
- 2. Except for the above case, the time of supply for a voucher is calculated on the date of redemption of voucher in all other cases.
D. Calculation of Time of Supply in Case of Reverse Charge
The reverse charge is the concept which tells us that the liability to pay tax is borne by the receiver of the goods and or the services in place of a supplier.
The time of supply will be the earliest of the following dates in case of reverse charge:
- The date on which goods are received,
- The date on which payment is done,
- 30 days after the date of issue of an invoice by the supplier. (60 Days in case of services)
Note – The time of supply is considered as the date of entry in accounts books of the receiver if all above three conditions are not fulfilled.
E. Calculation of Time of Supplies Through Residue Method
This is the last method among all the 5 methods. This method of deciding the time of supplies on the goods and or the services are considered when none of the above provisions doesn’t apply.
According to this method, the time of supplies of goods will be considered as the following:
- The due date of filing GST returns
- The date of payment of tax