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Time, Place and Value

of
Supply for Goods and Services
under GST
Introduction

Under GST, three types of taxes can be charged in the invoice. SGST and CGST in case
of an intra-state transaction and IGST in case of an inter-state transaction. But deciding
whether a particular transaction is inter or intrastate is not an easy task.

Think about an online training where customers are sitting in different parts of the world.

Say in case, hotel services, where the receiver may have an office in another state and
may be visiting the hotel only temporarily, or where goods are sold on a train journey
passing through different states.

To help address some of these situations, the IGST act lays down certain rules which
define whether a transaction is inter or intrastate.

There are three important concepts regarding this:


1. Time of Supply
2. Place of Supply
3. Value of Supply

Time of supply means the point in time when goods/services are considered supplied’.
When the seller knows the ‘time’, it helps him identify due date for payment of taxes.

Place of supply is required for determining the right tax to be charged on the invoice,
whether IGST or CGST/SGST will apply.

Value of supply is important because GST is calculated on the value of the sale. If the
value is calculated incorrectly, then the amount of GST charged is also incorrect.
Time of Supply of Goods

Point of taxation means the point in time when goods have been deemed to be supplied or
services have been deemed to be provided. The point of taxation enables us to determine
the rate of tax, value, and due dates for payment of taxes.

Under GST the point of taxation, i.e., the liability to pay CGST / SGST, will arise at the
time of supply as determined for goods and services. There are separate provisions for
time of supply for goods and time of supply for services

How to determine time of supply


The time of supply of goods shall be the earlier of the following dates:

 (a) The date of issuing of invoice (or the last day by which invoice should   have been
issued)
or
(b) The date of receipt of payment

-whichever is earlier

If the supplier receives an amount up to Rs. 1000 in excess of the invoice amount, the
time of supply for the extra amount shall be the date of issue of invoice (at the option of
the supplier).

For (a) and (b)- The supply shall be assumed to have been made to the extent it is covered
by the invoice or the payment (as the case may be).

For (b)- the date of receipt of payment shall be earlier of-

1. The date on which he entered the payment in his books


or
2. The date on which the payment is credited to his bank account

Example:
(a) Date of invoice- 15th May 2018
(b) Date of receipt of payment- 10th July 2018
(c) Date when supplier recorded receipt in books- 11th July 2018

Time of supply will be 15th May 2018.


Time of Supply of Services

Time of supply under reverse charge


Generally the supplier of goods or services is liable to pay tax. However, in special cases
like imports and other notified supplies, the recipient is liable to pay tax under reverse
charge mechanism.

Reverse charge means the liability to pay tax is on the recipient of goods/services instead
of the supplier.

In case of reverse charge, the time of supply shall be the earliest of the following dates:
(a) the date of receipt of goods or
(b) the date of payment or
(c) the date immediately after 30 days from the date of issue of invoice by the supplier

If it is not possible to determine the time of supply under (a), (b) or (c), the time of supply
shall be the date of entry in the books of account of the recipient.

For clause (b)- the date of payment shall be earlier of-


(i) The date on which the recipient entered the payment in his books
or
(ii) The date on which the payment is debited from his bank account
Example:
(a) Date of receipt of goods 15th May 2018
(b) Date of payment 15th July 2018
(c) Date of invoice 1st June 2018
(d) Date of entry in books of receiver 18th May 2018

Time of supply of goods 15th May 2018

If for some reason time of supply could not be determined supply under (a), (b) or (c)
then it would be 18th May 2018 i.e., date of entry
Time of Supply of Services
Time of supply for vouchers
In case of supply of vouchers the time of supply is-
(a) The date of issue of voucher, if the supply can be identified at that point
or
(b) The date of redemption of voucher, in all other cases;

Example: PQR Ltd. Purchased for its employees 80 vouchers dated 16.10.2018 worth Rs.
500 each from RST Ltd., a readymade garment manufacturing company. RST Ltd. Issued
such vouchers on 18.10.2018. The vouchers can be encashed at retail showroom of RST
Ltd. at any time within 10 days from the date of its issue. The employees of PQR Ltd.
encashed these vouches on 24.10.2018.

In this case, the supply of goods, i.e. readymade garments is identifiable at the time of
issue of vouches. Hence the time of supply shall be the date of issue of vouchers by RST
Ltd., i.e. 18.10.2018.

When time of supply cannot be determined


If it is not possible to determine the time of supply by the above provisions, then it will
be-
(a) The date on which a periodical return has to be filed
or
(b) The date on which the CGST/SGST is paid, in any other case.

In GST regime, the tax collection event will be earliest of the dates as given above. The
various events like issuing invoice/making payment in case of supply of goods /services
or completion of event-in case of supply of service triggering the tax levy, confirms that
the Government wants to ensure tax is collected at the earliest point of time.
The time of supply of services shall be the earlier of the following dates:
(a)  If invoice is issued within the period prescribed
(i) the date of issuing invoice
           or
(ii) the date of receipt of payment
                            -whichever is earlier

(b)  If invoice is NOT issued within the period prescribed


(i) the date of provision of service
           or
(ii) the date of receipt of payment
                            -whichever is earlier

(c) Where the provisions of clause (a) or (b) do not apply-


the date on which the recipient shows the receipt of services in his books of account

Note: Prescribed period for the purpose of clause (a) and (b) means before the provision
of service, or within 30 days after the provision of service, as per invoice rules (within 45
days in case of insurance or banking companies, or financial institutions).

If the supplier of taxable service receives an amount up to Rs. 1000 rupees in excess of
invoice amount, the time of supply for the extra amount shall be the date of issue of
invoice (at the option of the supplier).
For clauses (a) and (b)-
(i) The supply shall be assumed to have been made to the extent it is covered by the
invoice or the payment (as the case may be).
(ii) The date of receipt of payment shall be earlier of-
(a) the date on which he entered the payment in his books
           or
(b) the date on which the payment is credited to his bank account

Example:

1. Date of invoice 15th May 2018


2. Date of receipt of payment 10th July 2018
3. Date when supplier recorded receipt in books 11th July 2018
Time of supply will be 15th May 2018.
Time of supply under reverse charge
In case of reverse charge, the time of supply shall be the earliest of the following dates—
(a) the date of payment
    or
(b) the date immediately after 60 days from the date of issue of invoice by the supplier.

If it is not possible to determine the time of supply under (a), (b) or (c), the time of supply
shall be the date of entry in the books of account of the receiver of service.

For clause (a)- the date of payment shall be earlier of-


(i) the date on which the recipient entered the payment in his books
           or
(ii) the date on which the payment is debited from his bank account

When supplier is located outside India


In case of ‘associated enterprises’, where the supplier of service is located outside India,
the time of supply shall be-
(a) the date of entry in the books of account of the receiver
          or 
(b) the date of payment
-whichever is earlier

Example for reverse charge:


1. Date of payment 15th July 2018
2. Date of invoice 1st July 2018
3. Date of entry in books of receiver 18th July 2018

Time of supply of service 15th May 2018

If for some reason time of supply could not be determined supply under (a), (b) or (c)
then it would be 18th July 2018 i.e., date of entry in books
Time of supply for vouchers
In case of supply of vouchers, the time of supply is-
(a) the date of issue of voucher, if the supply can be identified at that point
          or
(b) the date of redemption of voucher, in all other cases

Example:

When time of supply cannot be determined


If it is not possible to determine the time of supply by the above provisions, then it will
be-
(a) the date on which a periodical return has to be filed
or
(b) the date on which the CGST/SGST is paid, in any other case.
GST is destination based tax i.e consumption tax, which means tax will be levied where
goods and services are consumed and will accrue to that state.

Under GST, there are three levels of Tax, IGST, CGST & SGST and based on the ‘’place
of supply’’ so determined, the respective tax will be levied. IGST is levied where
transaction is inter-state, and CGST & SGST are levied where the transaction is intra-
state. 

Example:

Location of Service Receiver Place of supply Nature of Supply GST Applicable

Maharashtra Maharashtra Intra-state CGST + SGST

Maharashtra Kerala Inter-state IGST

Place of Supply of Goods


Usually, in case of goods, the place of supply is where the goods are delivered.
So, the place of supply of goods is the place where the ownership of goods changes.

S.No. Nature of Supply of Goods Place of Supply

1. Where the supply involves the movement Location of the goods at the time at


of goods, whether by the supplier or the which, the movement of goods
recipient or by any other person terminates for delivery to the
recipient

2. Where the goods are delivered to the The principal place of business of
recipient, or any person on the direction of such person
the third person by way of transfer of title
or otherwise, it shall be deemed that the
third person has received the goods

3. Where there is no movement of goods Location of such goods at the time


either by supplier or recipient of delivery to the recipient

4. Where goods are assembled or installed at The place where the goods are
site assembled or installed

5. Where the goods are supplied on-board a The place where such goods are
conveyance like a vessel, aircraft, train or taken on board the conveyance
motor vehicle

6. Where the place of supply of goods cannot It shall be determined in such


be determined in terms of manner as may be prescribed

sub-sections (2), (3), (4) and (5)

Place of Supply of Services


1. Domestic Transactions

These are the transactions where both the parties i.e the supplier as well as recipient of
service are in India.
General Rule

In general, the place of supply for services will be the location of the service recipient
(the recipient needs to be a registered person). In cases, where service is provided to an
unregistered person, the place of supply will be the:

 Location of the service recipient (if the address is available on record)

 Otherwise, location of service provider

For understanding Place of Supply for Services the following two concepts are very
important namely:

 location of the recipient of services


 location of the supplier of services

a) Location of the recipient of services:

S.N Case Location of Recipient of Service


o

A where a supply is received at a place of business such place of business


for which the registration has been obtained
B where a supply is received at a place other than such fixed establishment
the place of business for which registration has
been obtained (a fixed establishment elsewhere)

C where a supply is received at more than one the location of the establishment
establishment, whether the place of business or most directly concerned with the
fixed establishment receipt of the supply

D in absence of such places the location of the usual place of


residence of the recipient;

b) Location of the provider/supplier of services:

S.N Case Location of Supplier of Services


o

A where a supply is made from a place of business the location of such place of
for which the registration has been obtained business

B where a supply is made from a place other than the location of such fixed
the place of business for which registration has establishment;
been obtained (a fixed establishment elsewhere)

C where a supply is made from more than one the location of the establishment
establishment, whether the place of business or most directly concerned with the
fixed establishment, provision of the supply
D in absence of such places, the location of the usual place of
residence of the supplier;

2. International Transactions

These are the transactions where either of the service recipient or the provider is outside
India. Transactions in which both the recipient as well as provider are outside India are
not covered here.

General Rule

The Place of Supply for services treated as international transactions shall be:

 The location of service recipient

 In case where the location of service recipient is not available, the place of supply
shall be location of the supplier.
Since the goods and service tax is realized on the value of goods and services at a
prescribed rate, hence it is important to determine the correct value of goods and services

GST is charged on the ‘transaction value’. Transaction value is the price actually paid(or
payable) for the supply of goods/services between un-related parties (i.e., price is the sole
consideration)

The value of supply under GST shall include:

1. Any taxes, duties, cess, fees, and charges levied under any act, except GST. GST
Compensation Cess will be excluded if charged separately by the supplier.

Example: The owner of a building is liable to pay Municipal Taxes or local taxes
to the local authority. If such taxes are paid by the tenant to the owner of the
building or is directly paid to the local authority, then such amount shall be added
while ascertaining the transaction value.

2. Any amount that the supplier is liable to pay which has been incurred by the
recipient and is not included in the price actually paid or payable

Example: Ram and company is engaged in manufacturing of readymade garment.

It made a supply of garments worth Rs. 500000 to X. As per the contract it was
decided that the designing for the garments would be arranged by X and provide to
Ram and Co. X spent an amount of Rs. 20000 in designing of these garments. It
was agreed that the cost of designing the garments shall be paid and borne by X
only for which Ram and Co. shall not make any deduction in the contract cost.
Ram and Co. prepared an invoice of Rs 500000 and X paid the amount. In normal
course GST shall be levied on the invoice price of Rs 500000 and there shall be a
loss of revenue to the Government. If X had not taken the liability to pay
designing charges, it would have been borne by Ram and Co., and the amount that
would have been charged to X was Rs. 520000. X, in both the situations has
actually paid Rs. 520000. In the first situation X has paid an amount of Rs. 500000
to Ram and Co. and Rs. 20000 as designing charges for the garments. In the
second situation the entire amount of Rs. 520000 was to be paid to Ram and Co.
Therefore for calculating the transaction value designing charges of Rs. 20000
shall be added to the invoice price of Rs 500000 and then GST shall be levied on
the transaction value of Rs 520000.

3. The value will include all incidental expenses in relation to sale such as packing,
commission etc.

Example: Z purchased 5000 liters of edible oil from an oil manufacturing


company at the rate of Rs 60/ liter. It was contracted that the goods (oil) shall be
supplied in containers. Before the supply of oil Z requested the company to supply
oil in packing of 5 liters and 1 liter. For this the company charged an amount of Rs
20000 separately as packing charges. In the contracted price of Rs 300000,
packing charges of Rs 20000 shall be added and GST shall be charges on the
amount of Rs 320000.

4. Subsidies linked to supply, except Government subsidies will be included.


5. Interest/late fee/penalty for delayed payment of consideration will be included in
the value of supply to determine the transaction value.

Example: PQR Ltd. supplied goods to Ram and Co. under a contract for which the
payment shall be made in 30 days. It was also agreed in the contract for any delay
in payment, interest at the rate of 12% per annum shall be charged. GST law
clearly mentions that any amount charged for delayed payment shall always be the
part of consideration and it shall be included in the price of taxable supply for the
purpose of ascertaining transaction value.