What is Time of Supply for Services on Forward Charge?

By Registrationwala

27th April 2017

 

Under the present indirect tax rule about delivering taxable services, service tax is always applied. However, the exact time when the service tax has to be paid to the central government is decided according to the point of taxation or POT. As per POT, the responsibility of paying service tax on forward charges has to be decided as per the rules given below.

It is here to mention that the invoice is issued within thirty days of completing the service, and the date of invoice is prior than that the date of receiving the payment. For example, if the service is completed on 15th of October, date of invoice can be around 20th as of the POT. And, the date of receiving the payment can be around 10th November.

The invoice is not usually issued under 30 days after completing the service. In such cases, the quickest of service completion or the date of payment receive is going to be the POT. For example, if the date of service completion is 1st of November, the date of invoice is 5th of December, date of payment receive is 10th, the POT is going to be on 1st November.

Under GST

Coming to the GST rule, the decision regarding the time about paying the tax is decided as per the ‘Time of Supply’ provisions. The decision regarding supply time of service is quite equivalent to that of deciding the time of supplying of the products. Though the services are indescribable unlike the goods, for covering up the distance between products and services, and to make things simpler, the restrictions to decide the time of supply for goods and services are quite identical. 

Given below are certain case studies explained with suitable example for a better understanding for the changes made under GST rule.

  • As per the GST liabilities, the date of invoice is the date on which the supplier issues the invoice. The proposed date to issue the invoice would be the last date on which the supplier has to issue the invoice, is the 30 days from that of the services. For the banking organizations, the invoice has to be passed within 45 days from the day of supplying the services. Talking about the payment receive, it is the earliest of the date on which the payment is credited in the books of accounts. In other words, it is the date on which the payment is credited to the person’s bank account.

For example, if the date of invoice is 20th October 2017, the payment receive s 10th of November, the date of supply has to be 20th October. Point to note here is that the date of invoice has to be earlier than the date of payment receiving. Suppose in any case, if the date of payment receive or the advance receipt is earlier than the date of invoice, the time of supply has to be equal as of the date of payment receive.

  • The time of supply is primarily the earliest of the date on which invoice made or the date of receiving the payment. Here the payment receiving date is decided as the quickest of the date on which the payment is delivered in the accounts, or the date on which the payment is credited to the concerned bank accounts. Point to note here is that the date on which the payment receiving is entered in the account has to be prior to the date on which payment is credited to the account.    
  • There are certain other cases where the date on which payment is credited to the bank is prior to that of the date on which payment is put in the account books. In such cases, the time of supply is supposed to be the quickest of the date on which invoice is made, or the day of payment receive. The date of payment receive is the date on which the payment is entered in the accounts or the day on which it is credited to the bank accounts.

·         Some confusion might appear in case of time of supply, where there is no invoice available. In such cases, the supply time will be the quickest of the last day of invoice issuing and receiving of payments. It is here to note that the last date to issue the invoice is going to be thirty days from the date of service supply. For example, if the date of service completion is 1st November, 2017, the payment receive date is 5th December, and the date of supply of services has to be 30th November, 2017. This is so as the thirty days date of completion of services is earlier than that of the payment receive.   

 

What is Time of Supply for Services on Forward Charge?

2017-04-27