Time and place of supply- when, where and how?

Sakshi Laturiya (CA Final)

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Time and place of supply - when, where and how?

Saakshi Laturiya Time and place of supply –  when, where and how?


About Author:

Name: Sakshi Laturiya (CA Final).

Author is CA final student, Currently associated with          M/s. SSRPN & Co in Indirect Tax Division. She is a regular writer and speaker and has written various articles on Indirect Tax.

 

 


 Before the advent of Good and Service Tax (GST) the taxes imposed were VAT, service tax,  excise duty and so on. These were basically tax on purchase, sale of goods or services. But with the emerging concept of GST, the frequently used term “Purchase /  Sale” has been replaced by “Supply”. “Supply” is not only used with goods but also with the services. Nothing is left for any confusion and the definition includes every term which could be coined as sale.

Any transfer of title to goods is a “supply” of goods, transfer of right to use goods, Hire purchase transactions, transfer of business assets are also brought under the ambit of term ‘supply’ as per Schedule II.

 Supply includes

  • All forms of supply of goods and/or services such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business,
  • Importation of service, whether or not for a consideration and whether or not in the course or furtherance of business, and
  • A supply specified in Schedule I, made or agreed to be made without a consideration.

Schedule II, in respect of matters mentioned therein, shall apply for determining what is, or is to be treated as a supply of goods or a supply of services.

Notwithstanding anything contained in sub-section (1), following activities shall be treated neither as a supply of goods nor a supply of services.

  • Activities or transactions specified in schedule III; or
  • Activities or transactions undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities as specified in Schedule IV,

Subject to sub-section (2) and sub-section (3), the Central or a State Government may, upon recommendation of the Council, specify, by notification, the transactions that are to be treated as—

  1. A supply of goods and not as a supply of services; or
  2. A supply of services and not as a supply of goods; or
  3. Neither a supply of goods nor a supply of services.

The tax liability on a composite or a mixed supply shall be determined in the following manner —

  • 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;
  • A mixed supply comprising two or more supplies shall be treated as supply of that particular supply which attracts the highest rate of tax. 

Time of Supply (TOS)

The taxability arises when the supply took place. It is important to know the exact incidence of taxation or exact timing of supply of goods or service.

Time of supply is not the same for all goods and services; it may be on removal of goods, receipt of goods, date of invoice or date of payment. It has been defined differently for goods as well as services.

Section 12 – Time of Supply of Goods

Normal charge:

TOS shall be earliest of

  • Date of issue of Invoice by the supplier; or Last date on which he is required to issue the invoice with respect to supply; or
  • Date of receipt of the payment with respect to supply
    if excess receive up to Rs. 1,000/, then TOS at the option of supplier.
  • TOS on account of addition in value on account of late fees, interest, fine etc. shall be the date of such receipt

Reverse charge:

TOS shall be earliest of

  • Date of Receipt of Goods
  • Date on which Payment is made
  • Immediately following 30 days of invoice

Gift vouchers:

TOS shall be

  • If Supply identifiable at that point – Date of Issue
  • In other cases – Date of redemption

Others cases:

TOS shall be

  • Where periodical return has to be filed – Date when such return is to be filed; OR
  • In any other case – Date on which tax paid

Where not determinable as per above, date of entry in books of account of recipient to be treated as TOS.

As per the latest provisions in normal duration the supplier is required to issue the invoice at time of

  • Removal of Goods for Supply to the recipient, where movement is involved; or
  • Delivery of goods or making available, in any other case

Making available Means-

  • Means goods are placed at the disposal of recipient.
  • Physically not capable of being moved – M/c embed to earth
  • Supplied in assembled or installed form.
  • Supply to his agent or his principal.

In case of Continuous supply of goods

             Where successive statement of accounts or payment is involved, invoice shall be issued before or at the time of issuance of each such statement or at the time of receipt of each such payment.

Section 13 – Time of Supply of Service

Normal charge:

TOS shall be:

  • Date of issue of Invoice by the supplier if the invoice issue within the period prescribed under section (2) of section 31; or date of receipt of the payment, whichever is earlier.

Invoice shall be issued before or after the provision of service. In  a  case  where  the  supply  of  services  ceases  under  a  contract  before  the completion of the supply the invoice shall be issued at the time when the supply ceases  and  such  invoice  shall  be issued  to the  extent  of the  supply  effected before such cessation.

  • Date of provision of service, if the invoice is not issue within the period prescribed under section (2) of section 31; or date of receipt of the payment, whichever is
  • Date on which the recipient shows the receipt of service in his books of accounts, in case where the provision of sec (a) and (b) do not apply.
    If excess receive up to Rs. 1,000/, TOS at the option of supplier

Reverse charge

TOS shall be earliest of the following:

  • Date on which Payment is made
  • Date immediately following 60 days of invoice

where not determinable as per above, TOS shall be date of entry in books of account of recipient. And in case of ‘associated enterprises’, where the supplier of service is located outside India, TOS shall be date of entry in books of account of recipient or date of payment whichever is earlier.

Gift Vouchers

TOS shall be following

  • If Supply identifiable at that point – Date of Issue
  • In other cases – Date of redemption

Other case

TOS shall be

  • Where periodical return has to be filed – Date when such return is to be filed
  • In any other case – Date on which CGST/SGST paid

In case of change in rate TOS shall be as follows:

SR No. Supplied Issue of Invoice Receipt of Payment Time of Supply
 

1

Before After After Date of Invoice or Receipt of Payment, whichever is earlier
2 Before Before After Date of Issue of Invoices
3 Before After Before Date of Receipt of Payment
4 After Before Before Same as 1.
5 After Before After Same as 3.
6 After After Before Same as 2.

Date of Receipt of Payment shall be identified as follows:

Normal Course

  • Date of Entry in BOAs
  • Date of Credit in Bank

Change in rate of Tax

  • If date of Cr. In Bank, is after 4 working days from the date of change in rate of tax
  • The date of credit in bank.

 

Place of Supply (POS):

GST would be a destination based tax and hence the concept of POS shall become very important to decide the nature of supply as well as the concerned Government entitled to receive its share of GST.

  • Supply of goods and services in the course of inter-State trade or commerce means any supply where the location of the supplier and the POS are in different States.
  • Supply of goods and services in the course of intra-State trade or commerce means any supply where the location of the supplier and the POS are in same State.

Thus, for determining whether a supply is inter-state or intra-state, it is important to determine its “place of supply”.

It is not clear that if any service falls in two or more categories then which rule would apply. For example

If a spa service is provided is provided on board aircraft, whether the POS of such service would be determined as per

  • section 6(11) – POS of services on board a conveyance; or
  • section 6(5) – POS of beauty treatment services

In my view, in such cases where a service falls under two sub sections, principles like which one is more specific, which one is more beneficial to the assesse.

Determining the POS of service is difficult, as services are intangible. Rules for determining POS of service are very important to bring uniformity. The principle of “destination based consumption tax” is a guiding factor for determining the POS of services under various circumstances. Thus the POS would be in most cases fixed at the place where the services are destined (not easy to do so).

 Rules for determining “place of supply” of services:

Section 6(15) – Advertisement services to Government

POS of Advertisement services to CG/ SG/ Statutory body/ local authority meant for identifiable states shall be taken as located in each of such States.

Section 6 (14) – Insurance Services

POS of Insurance services

  • To a registered person shall be the location of such person
  • To a person other than registered person be the location of the recipient of services on the records of the supplier of services

Section 6 (13) – Banking and other financial services

POS for banking and other financial services including stock broking services to any person shall be the location of the recipient of services on records of the supplier of services.

If the service is not linked to the account of the recipient of services, the POS shall be the location of the supplier of services.

Some examples of such service can be

  1.  Currency Exchanges;
  2.  Preparation of demand draft by banks on cash deposit;
  3. Discounting of bills of exchange etc.

Section 6 (12) – Telecommunication services

POS of Telecommunication services including data transfer, broadcasting, cable and direct to home television to any person shall:-

In case of services by way of fixed telecommunication line, is where the same is installed for receipt of services.

In case of mobile connection for telecommunication and internet services provided on-

  • Post-paid basis –be the location of billing address of service recipient on record of service provider.
  • Pre-paid basis –be the location of where such pre-payment is received or such vouchers are sold.

Provided that if such services are availed through internet banking or other electronic mode of payment, POS shall be the location of the service receiver on record of service provider.

Section 6 (11) – Services on board a conveyance

POS for services on board a conveyance such as vessel, aircraft, train or motor vehicle shall be the location of the first scheduled point of departure of that conveyance for the journey.

Section 6(10) – Passenger transportation service

POS for passenger transportation service:

  • To a registered person – shall be the location of such person
  • To a person other than a registered person – shall be the place where the passenger embarks on the conveyance for a continuous journey

Section 6 (9) – Transportation of goods service

POS of services by way of transportation of goods including mail or courier:

  • To a registered person – shall be the location of such person
  • To a person other than registered person – shall be the location of at which such goods are handed over for their transportation.

Section 6(8) – Services relating to events

POS of services provided by way of:

  • Organization of a cultural, artistic, sporting, scientific, educational or entertainment event including supply of services in relation to a conference, fair, exhibition, celebration or similar events, or
  • Services ancillary to organization of any of the above events or services, or assigning of sponsorship of any of the above events:
  1. To a registered person – shall be the location of such person
  2. To a person other than a registered person –shall be the place where the event is actually held

Section 6(7) – Services relating to admission to event/ park

POS services provided by way of:

Admission to a cultural, artistic, sporting, scientific, educational, entertainment, amusement park, or any other place or event and services ancillary to admission shall be the place where the event is actually held or such place is located.

Section 6(6) – Services relating to training and performance appraisal

POS of services in relation to training and performance appraisal:

  • To a registered person – shall be the location of such person
  • To a person other than registered person – shall be location where the services are actually performed.

Section 6(5) – Restaurant and other services

POS of restaurant, catering, personal grooming, fitness, beauty treatment, and health services including cosmetic and plastic surgery shall be the location where the services are actually performed.

Section 6(4) – Services in relation to immovable property etc.

POS of services

  • In relation to:
    • Immovable property, including services provided by architects, interior decorators, surveyors, etc.
    • any service provided by way of grant of rights to use immovable property or for carrying out or co-ordination of construction work, or
  • By way of lodging accommodation by a hotel, Inn, Guest house, Home stay, Club, etc.
  • By way of accommodation in any immovable property for organizing any marriage or reception or matters related therewith, official , social, cultural, religious, or business function including services provided in relation to such function at such property
  • Any service ancillary to the services above

shall be the location at which the immovable property or boat or vessel is located or intended to be located.

Section 6(2) and (3) – General Rule

POS of services other than mentioned in Sub-sections (4) to (15) of Section 6:

  • Made to a registered person – shall be the location of such person.
  • Made to a person other than a registered person shall be the location of the recipient where the address on record exists, and shall be the location of the supplier of services in other cases.

Rules for determining “place of supply” of goods:

Section 5 of the IGST Act provides for the rules for determining “place of supply” of goods. Since goods are tangible, determining “place of supply” of goods is comparatively easy.

Section 5(2) – supply involves movement

POS of goods, where the supply involves movement of goods, whether by the supplier, or recipient, or any other person shall be the location of the goods at the time at which the movement of goods terminates for delivery to the recipient.

Section 5(2A) – supply involves movement

POS where the goods are deliver by the supplier to a recipient or any other person, 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 say third person has receiv the goods and the POS of such goods shall be the principal place of business of such person.

Section 5(3) – supply does not involve movement

POS of goods, where the supply does not involve movement of goods, whether by the, supplier, or recipient shall be the location of such goods at the time of delivery to the recipient.

Section 5(4) – Goods installed or assembled at site.

POS where the goods are install or assembled at site shall be the place of such installation or assembly.

Section 5(5) – Goods supplied on board a conveyance

POS where the goods are supply on board a conveyance, such as a vessel, aircraft, train or a motor vehicle shall be the location where the goods are take on board.

Section 5(6) – residuary rule

Where the POS of goods cannot be determine in terms of the other rules law shall be make by the Parliament in accordance with the recommendation of the GST Council.

These were the rules in relation to Time and Place of supply.

Time and Place of supply mentioned above is the crux of “One nation one tax” regime. The above principles would go a long way in providing ease to taxpayers and accordingly levy tax based on the same. It is the basis by which you can file the return and understand how much to pay. Also will decide whether a person is would be penalize for the late payment. It would bring a certainty as to whose income it would be state or central (due to intrastate and interstate supply).

Time and place of supply


Disclaimer: Author of this write up intends to impart the knowledge of the amendment made by the Government regulatory and step taken to ease the compliance. Author is nowhere liable for any damage or indirectly and it is advisable to the viewers to consult their professional expertise to seek the advice.

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