SECTION 12 TIME OF SUPPLY OF GOODS

GST Update 05.08.2016

GST DAILY DOSE OF UPDATION:-

SECTION 12 TIME OF SUPPLY OF GOODS:-

(1) The liability to pay CGST / SGST on the goods shall arise at the time of supply as determined in terms of the provisions of this section.

(2) The time of supply of goods shall be the earliest of the following dates, namely,-

(a) (i) the date on which the goods are removed by the supplier for supply to the recipient, in a case where the goods are required to be removed or

(ii) the date on which the goods are made available to the recipient, in a case where the goods are not required to be removed; or

(b) the date on which the supplier issues the invoice with respect to the supply; or

(c) the date on which the supplier receives the payment with respect to the supply; or

(d) the date on which the recipient shows the receipt of the goods in his books of account.

Explanation 1.- The provisions of sub-clause (ii) of clause (a) shall apply in cases where the goods

(a) are physically not capable of being moved; or

(b) are supplied in assembled or installed form; or

(c) are supplied by the supplier to his agent or his principal.

Explanation 2.- For the purposes of sub-clause (ii) of clause (a), the expression ‘made available to the recipient’ shall mean when the goods are placed at the disposal of the recipient.

Explanation 3.- For the purposes of clauses (b) and (c) of sub-section (2), the supply shall be deemed to have been made to the extent it is covered by the invoice or, as the case may be, the payment.

Explanation 4.- For the purpose of clause (c) of sub-section (2), “the date on which the supplier receives the payment” shall be the date on which the payment is entered in his books of accounts or the date on which the payment is credited to his bank account, whichever is earlier.

The above provisions for determining time for supply of goods have been made very complex as compared to the provisions presently in force. Presently, in Excise Laws, excise duty is payable on removal of goods while in VAT Laws, VAT is payable on sale of goods. However, the proposed GST regime prescribes 4 parameters and the GST will be payable at the point of occurrence of earliest of the 4 parameters. Moreover, the clause (d) prescribing the time of supply as date on which the recipient shows the receipt of goods in his books of accounts is practically impossible to be ascertained by the supplier of goods. The supplier of goods cannot determine the date when the recipient has recorded receipt of said goods in his books of accounts. As such, clause (d) is a parameter that is difficult to comply.

Furthermore, explanation no. 4 specifies that date of payment shall be recognized as date on which amount is credited in bank account or date on which payment is entered in books of accounts of the supplier, whichever is earlier. This has the consequence that even if supplier acknowledges and enters payment later on, the time for supply of goods will be considered as the date on which amount is credited in bank account. This again will compel supplier to keep track record of date of payments received in his bank accounts.

Although, it is proclaimed that GST will be a uniform and easy taxation reform, the provisions regarding determining time for supply of goods, which is one of the important provisions of GST regime indicate the complexity that will be faced by assessees in the GST regime.

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GST Update 05.08.2016

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