Time of Supply/ Point of Taxation

Time of Supply/ Point of Taxation

 GST is payable on supply of goods or services. A supply consists of elements that can be segregated or separated in respect to time, like purchase order or agreement for sale, provision of services, despatch of goods, delivery of goods. Payment, entry of payment or amount deposited to Bank. So at which of these points of time, will GST become payable? Will it become payable when an agreements to supply goods or services are provided or when invoices is issued or when payment is made? What happens if the goods are delivered over a period of time? What happens if the services are provided over a period of time?  Provision relating to ‘time of supply’ provides answer to all such questions that arise on the timing of the liability to pay CGST and SGST/UTGST (Intra-State supply) and IGST (Inter-State Supply) as time of supply fixes the point of time when the liabilites to pay tax arises.

Time of Supply of Goods, u/s 12 of CGST Act

Time of Supply of Goods under forward charge The time of supply of goods shall be (a) Date of issue of tax invoice [When invoice is issued within time limit of issue of invoice] (b) Last date on which invoice ought to have been issued [When invoice is not issued within time limit] (c) Date of receipt of payment –Earlier of the above three Note : 1. Time limit for issue of invoice for supply of goods (a) Where supply involves movement of goods → at the time or before the removal of goods. (b) Where supply does’t involve movement of goods → at the time or before the delivery of goods. (c) In case of continious supply of goods: → at the time or before the time of issuance of periodical statement. Note: 2. Date of receipt of payment shall be (a) Date on which the payment is recorded in the books of accounts of the supplier (b) Date on which the payment is credited to the supplier’s Bank A/c

Note : 3. If the payment received is upto Rs. 1000 in excess of the invoice amount, the supplier can choose to take the date of invoice issued with respect to such excess amount as the time of supply of goods for such excess value. Note: 4. When the payment is received in instalments, the time of supply shall be determined seperately for each instalment.

Time of Supply of Services

Time of supply of services under forward charge Section 13(2) CGST Act prescribed the manner for determination of time of supply in case of supply of services under forward charge: Case  1 : Invoice has been issued within time limit u/s 31 The time of supply shall be (a) Date of issue of invoice (b) Date of receipt of payment Earlier of the above two. Case 2 : Invoice has not been issued within time limit u/s 31 The time of supply shall be (a) Date of provision of service (b) Date of receipt of payment Earlier of above two Note: 1. Time limit for issue of invoice (a) For Banking and Financial institution-within 45 days from the provision of service (b) For other case–within 30 days from the date of provision of service. Note: 2. Date of receipt of payment shall be (a) Date on which the payment is recorded in the books of accounts of the supplier (b) Date on which the payment is credited to the supplier’s Bank A/c Note : 3. If the payment received is upto Rs. 1000 in excess of the invoice amount, the supplier can choose to take the date of invoice issued with respect to such excess amount as the time of supply of goods for such excess value.

Note: 4. When the payment is received in instalments, the time of supply shall be determined separately for each instalment.

Time of Supply of vouchers

In case of supply of vouchers by a supplier, the time of supply (TOS) shall be (a) The date of issue of voucher → If supply is identifiable at the point (b) The date of redemption of Voucher → if supply is not identifiable at that point of issue of voucher. Where it is not possible to determine the time of supply u/s 12, then time of suply shall be (a) Date on which periodic return has to be filed (b) In other case → the date on which tax is paid.

Supply of Goods under Reverse Charge Mechanism (RCM)

Section 12(3) of CGST Act provides that in case of supply of goods under RCM, the time of supply shall be (a) Date on which the goods received (b) Date of payment earlier of (i) Date of payment by Debiting Bank A/c (ii) Date of Book entry (c) Date immediately following 30 days from the date of issue of invoice.

Time of Supply of Service under RCM

 (a) Transaction between non-associate enterprises Section 13(3) of CGST Act provides that in case of supply of services taxable under RCM the time of supply shall be (i) Date of payment (ii) Date immediately following 60 days from the date of issue of invoice. Note: If Time to supply (TOS) can’t be determined as above parameters, then the TOS is the date of book entry of services in the Books of recipient.

 (b) Transaction between associated enterprises. TOS shall be earlier of (i) Date of payment (ii) Date of debit entry in the books of accounts of the recipient of services.

Place of supply

 Place of supply

Brief overview

Under the GST environment, Place of Supply (PoS) of Goods and services is the most important concept because the chargeability of GST is based on three pillars.

§ Taxable event i.e supply

§ Time of supply of Goods / Services (point of taxation)

§ Place of Supply of Goods and services.

Therefore it can be said that Place of Supply is very significant for computation of tax under GST regime.  In case the Place of Supply is wrongly determined, it has vast implication under provision of section 77. According to that section if a person wrongly collect and paid the CGST and SGST assuming the transaction is a Intra-State supply, while the actual transaction is a Inter-State supply, shall refund the CGST/SGST and paid IGST along with interest and vice versa. Under GST it is very important to determine the nature of supply because it’s only after determining the same we can make sure the tax that is to be collected and paid. Hence, in case the nature of supply is Inter-State we shall apply Integrated Goods and Service Tax (IGST) on the transaction and in case of Intra-State supply we need to apply both i.e. Central Goods and Service Tax (CGST) and State Goods and Service Tax (SGST). As per section 7 of IGST Act, a transaction is said to be a Intra-State supply if the location of supplier and the Place of Supply of goods and services are in same state or same Union Territory. As per section 8 of IGST Act a transaction is said to be a Inter-State supply if the location of supplier and the Place of Supply of goods and services are two different States or two different Union Territory or one in Union Territory and another is State Territory. Inter- State supplies also includes the supply of goods or services imported into India, where LoS (location of supplier) is outside India and PoS (Place of Supply) is in India, and supply of goods and services exported from India, where LoS in India but PoS is outside India. Apart from this there are some specified transactions which actually looks like Intra- State supplies but deemed to be a Inter- State supplies, for example supplies made to or by SEZ units even within the State would considered as Inter- State Supplies. All Intra-State supplies are governed by Central GST Act and State/ Union Territory GST Act, 2017 and applicable taxes are CGST plus SGST/UGST. So imposition of two different kinds of taxes on the same transaction indicates the equal share of taxes by Central and State/ UT Government. All Inter-State supplies are governed by the IGST Law applicable levy on the transaction is IGST. This IGST include the share of both Central Government and respective state/ UT Government which is consider as the Place of Supply. Thus the concept of Place of Supply is the Utmost important from the point of Government to determine which State or Union Territory will get the share of IGST and it is also important for the business to identify which taxes to be imposed depending upon whether the transaction is Inter sate supply or Intra- State supply. In this article I will try to cover the provisions of Place of Supply of goods and services of IGST law for domestic and cross border supply under the following points.

 Scope of the sections

Section 10 to 13 of the IGST Act 2017 indicates the principles to determine the Place of Supply.

1. Section 10 governs the Place of Supply of goods other than goods imported into and exported from India.

2. Section 11 governs the Place of Supply of Goods imported into or exported from India.

3. Section 12 governs the Place of Supply of services, where location supplier and location of recipient is in India.

4. Section 13 governs the Place of Supply of services, where the location supplier or location of recipient is outside India.

It important to state that where section 10 and 12 deals with domestic transaction but Section 11 and 13 deals with cross border transactions of goods and services. Also section 10 and 11 covers the Place of Supply of goods, but section 12 and 13 covers the supply of services, both are independent provisions.

Place of Supply of Goods other than export and import

According to the related provisions, Rules governing the Place of Supply of Goods other than Imports and export (for Domestic supply) are as under-

1) where the supply involves movement of goods:

Supply involves movement of goods whether by the supplier or the recipient, the Place of Supply of such goods shall be the location of the goods when the movement of goods terminates for delivery to the recipient. This implies that place of supplier or receiver is of no consequence to determine the Place of Supply when it comes to those transactions which involve the movement of goods. The place where delivery terminates i.e. where the ownership is passed on shall be critical to determine the Place of Supply. 

Case study 1:

 A Ltd. of West Bengal sold 300 units of computer to Info Traders of Bihar, to be delivered at his office at Jharkhand. Place of Supply of goods is Jharkhand and IGST will be levied as it is A Inter- State supply. 

1) where the goods are delivered on the direction of a third person:

where the goods are delivered by the supplier to a recipient on the direction of a third person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to the goods or otherwise, it shall be deemed that the said third person has received the goods and the Place of Supply of such goods shall be the principal place of business of such person. When goods are delivered to a party on the direction of a third person the Place of Supply will be the location of such third person and not where the delivery terminates.

Case study 2:

 Samanta Traders, a dealer in Furniture, located in west Bengal place an order to Rahim traders located at Assam, for 100 units of Chairs, with the direction that to Deliver the Chairs to City College of Kolkata, West Bengal, who is the customer of Samanta Traders.

There are two legs of the Transaction

Leg1: Samanta Traders and Rahim Traders, Place of Supply is West Bengal and IGST will be levied as Inter- State sale.

Leg 2: Samanta Traders and City College (Having Registered under GST), PoS of goods is West Bengal and Intra- State supply, CGST plus SGST will be charged.

2) Where supply involves no movement of goods

Where the supply does not involve movement of goods, whether, by the supplier or the recipient, the Place of Supply shall be the location of such goods at the time of the delivery to the recipient. However, when goods are of such nature which does not require any movement, Place of Supply shall be the location of such goods.

Case study 3:

Silk Traders of Gujarat Sold 20 pieces of silk salwar to Amit traders of west Bengal at Gujarat show room. Here the transaction is Intra -Sate Supply of goods, as Place of Supply is Gujarat.

3) When Goods are Installed-

Where the goods are assembled or installed at site, the Place of Supply shall be the place of such installation or assembly.

Case study 4: 

Ramco Limited registered in Bihar opens a new office in Delhi. It purchases 10 ACs to be installed at its Delhi office from Patil electronics in Bihar. In this case, the location of the supplier is Bihar, but a Place of Supply of goods will be Delhi. Hence, IGST will be levied.

4) Goods on Board a conveyance

In case the goods are supplied on board a conveyance, including a vessel, an aircraft, a train or a motor vehicle, the Place of Supply shall be the location at which such goods are taken on board. This provision includes those purchases which are done while travelling on a conveyance.

Case Study 5:

Mr. Mehta is travelling on a cruise liner from Mumbai to Goa. He purchases a book from the in-house store in the cruise liner. These books were on-boarded from Mumbai. Registered place of business of the book shop is in Mumbai. Place of location of supplier is Maharashtra and Place of Supply of goods , in this case, will be Maharashtra. This is an Intra-State supply, and CGST and SGST will be charged.

 Place of Supply of services other the export and import services

Broad principles governing the Place of Supply of services where the location of service supplier (provider) and recipient (Receiver) is in India, are 13 in numbers, out of which 1 is general principle and 12 are specific situation based principles. For the most supplies of services, the places of supply of services are determined by “General Rule”. However, some supplies are subject to special rules for fixing the Place of Supply of services, depending upon the nature of services referred in those respective rules.

1) General Rules:

 Where both supplier and recipient are located in India, the Place of Supply of service would be:

a) When the service supplied or provided to persons registered under the GST the Place of Supply of service is the location of registered person.

Case Study 7:

Mr. Rahaman is the chartered accountant of West Bengal, provided Professional services to a ABC Ltd, of Assam. The PoS of the Service is the Location of Registered person. Here it is Assam. So Mr. Rahaman will charge IGST for his service as Inter- State Supply.

b) When the services are provided to a un-registered person but the address exists on records of the supplier of service, the Place of Supply of service is the  location of service recipient of to un-registered persons.

Case study 8:

Samanta Furniture of Kolkata is providing services of Renting of furniture to Amit of Midnapur. Then the location of supply of services is at West Bengal, hence Intra- States supply. So both CGST plus SGST will be levied.

c) When the services are provided to a un-registered person but the address does’t exists on records of the supplier of service, the Place of Supply of service is the location of service supplier or provider.

Case study 9:

Infotech Kolkata is providing computer repair services to Rahul of Jharkhand, unregistered person and address is not available in its records. In this situation Place of Supply is location of service provider i.e West Bengal (Intra- State supply)

The general rule has been framed keeping in the view the difference between B to B and B to C supplies. The rule is very well aligned with the overall philosophy of GST Act which is destination based consumption tax.

2) Specific Rules

a) Place of Supply of the Services in relation to immovable property is the location of the immovable property without differentiating the B to B and B to C supplies. (Availing input tax credit from a state where the service receiver has no place of business may difficult) The rule covers

§ Services like Architecture, interior decoration, construction any others of similar nature.

§ Services of accommodation for staying in hotel, guest house, lodge, inn etc. or for organising any function or events.

b) Place of Supply for the restaurant and catering services personal grooming, health and beauty services etc., is the location of actual performance.

c) Place of Supply for services like training and performance appraisal  is the

§ For Registered service recipient –location of the service recipient (can claim ITC-input tax credit)

§ For un-registered recipient – place of actual performance.(no question of claiming ITC)

d) Place of Supply for the services provided by way of admission to an event or amusement park or any other place is the location of the event or park without differentiating the B to B and B to C supplies.

e) Place of Supply for the services provided by way of organising such events and other ancillary services in this connection is the

§ For Registered service recipient –location of the service recipient (can claim ITC-input tax credit)

§ For un-registered recipient – location of actual performance.(no question of claiming ITC). If the event is outside India then location of service recipient will the Place of Supply for un-registered person..

f) Place of Supply for the services transportation of goods , including mail or courier is the

§ For Registered service recipient –location of the service recipient (can claim ITC-input tax credit)

§ For un-registered recipient – location of  where goods are handed over for transportation

g) Place of Supply for the services of Passenger transportation is

§ For Registered service recipient –location of the service recipient (can claim ITC-input tax credit)

§ For un-registered recipient – location where passenger embarks on a conveyance for the continuous journey.

h) Place of Supply for the services on the board of conveyance like Aircraft, Vessel train, motor vehicles is the first departure point of the conveyance of that journey.

i) Place of Supply for the telecommunication services like data transfer, broadcasting, cable and DTH services to any person has been prescribed differently

§ For fixed line, leased circuits, cable or dish antenna – place of installation

§ For post paid mobile/ internet connection – location of billing address.

§ For pre paid mobile/ internet connection – address of the selling agent or the location of sale in different situation.

This is largely in the line with the provision followed by other developed nations.

j) Place of Supply for banking and financial services including services of stock broking firm shall be

§ Location of receiver is available in records - the location of service receiver.

§ Location of receiver is not available in records – the location of service provider

Such provision is similar to the previous provision in service tax.

k) Place of Supply for insurance services shall be the location of the service recipient in case of business or otherwise.

l) A special rule is framed for the advertising services provided to the government whether central or state / union territory. Place of Supply is the respective state for which the advertisement is meant for.

After discussing the principles governing PoS for the entire domestic supplies of services, it may be seen that overall objective of the principle is to capture the location of consumption of services and to ascertain the PoS accordingly.

Mixed supply in GST

Mixed supply

As per sec. 2(74) mixed supply means –

§ Two or more individual supplies of goods or services or any combination thereof,

§ Made in conjunction with each other

§ By a taxable person

§ For a single price

§ Where such supply does not constitute a composite supply.

Condition for mixed supply

Any supply of goods or services will be treated as mixed supply if it satisfies the following conditions simultaneously:

1. Supply of two or more individual supply

2. It is not naturally bundled i.e., goods or services are usually not provided together in normal course of business. They can be separated.

3. None of the supplies is principal supply.

Tax liability for composite supply

As per sec. 8 of CGST Act, 2017 a supplies mixed supply comprising two or more shall be treated as a supply of that particular supply which attracts the highest rate of tax.

Guiding principles for determining whether supply is a composite supply or mixed supply

Following guiding principles could be adopted to determine whether it would be a composite supply or mixed supply.

Description	Composite supply	Mixed supply
Naturally bundled Supplied together Can be supplied separately One is predominant supply for recipient Each supply priced separately	Yes Yes No Yes No	No Yes Yes No No

Criteria for determining natural bundle

§ Perception of customer about the supply.

§ Market trend i.e. how other supplier supplies.

§ Nature of ingredient of supply.

: Composite Supply in GST

COMPOSITE SUPPLY

Brief overview

GST is payable on supply of goods/ services at a rate notified by the government. In case of supply of single goods/ services poses no problem for determination of applicable GST rate, if they are clearly identifiable. However, some of the supplies are a combination og goods/combination of services/ combination of services and goods wherein each individual component of such supply attract a different rate of tax. In such cases, determination of applicable rate of tax to be levied on such supplies may be a challenge. To address this issue, the GST law categorises such supplies into composite supplies and mixed supplies.

Composite supply

U/S 2(30) of CGST Act, 2017 Composite supply means a supply –

§ Made by a taxable person

§ to a recipient

§ consisting of two or more taxable supplies of goods or services or both, or any combination thereof,

§ which are naturally  bundled, and

§ supplied in conjunction with each other in ordinary course of business,

§ and out of all supplies, one of which is principal supply. (Principal supply means predominant element of composite supply for which other supplies forming part of composite supply play an ancillary role)

Condition for composite supply

Any supply of goods or services will be treated as composite supply if it satisfies the following conditions simultaneously:

1. supply of two or more taxable supply

2. it is naturally bundled i.e., goods or services are usually provided together in normal course of business. They cannot be separated.

3. One of the supplies must be principal supply.

Tax liability for composite supply

As per sec. 8 of CGST Act, 2017 a composite supply, comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply.  Accordingly the tax rate applicable for the goods or services which is treated as principal supply is the rate of tax for composite supply.