Point of Taxation (POT) refers to the point in time when tax is required to be paid. This is a mechanism which is used to determine the point in time when the tax liability will arise.
Under the current indirect tax regime, the point of taxation is different for each of the tax type.
| Scenario | Type of Tax | Point of Taxation |
| Manufacturing of Goods | Central Excise | Incidence of excise duty arises on the manufacture of goods in India, and the liability to pay excise duty arises at the time of removal of the excisable goods from the excise unit. For example, Goods manufactured on 28th April, 2016 and removed from the excise unit for sale on 5th May,2016. The liability of excise will arise on 5th May, 2016. |
| Rendering of Services | Service Tax | Broadly, the time for payment of tax will be the earliest of (a) date of receipt of payment or (b) date of issue of invoice. |
| Sale of Goods | VAT/CST | VAT/CST, as the case may be, on intrastate and interstate transactions arises on the sale of goods. |
Under GST, the taxable event is ‘Supply’ of goods and services. The point in time when goods or services are supplied will be determined in terms of ‘Time of Supply’ provisions.
Also read Supply of Goods and Services: What does it Mean?
In this blog, we will discuss the time of supply for goods.
For better understanding, let us split time of supply for goods as:
- Forward Charge on supply of goods
- Reverse Charge on supply of goods
Forward Charge on supply of goods
Forward Charge is a mechanism in which the supplier has to levy tax and remit the same to the credit of the Central or State Government. Under the current tax regime, tax is levied and collected on most transactions using the Forward Charge mechanism (also called Direct Charge).
For example, Super Cars Ltd sold spare parts worth Rs 1,00,000/- to Ravindra Automobiles and collected VAT of Rs 14,500 at the rate of 14.5 %.
The VAT collected by Super Cars Ltd is under the Direct Charge Mechanism.
Let us understand ‘Time of Supply of Goods’ under GST on Forward Charge
The liability of GST (CGST and SGST or IGST, as applicable) will arise as shown below:
| Earliest of the following | |
| Date of invoice | The date on which the supplier issues the invoice. |
| Due date to issue invoice | The last date on which the supplier is required to issue the invoice with respect to the supply of goods. In case of supply of goods involving the movement goods, the invoice needs to be issued at the time of removal. In other cases, at the time of delivery of goods to the recipient. |
| Receipt of payment | The date on which payment is received. The point of taxation in this case will be the earliest of the date on which payment is accounted in the books of accounts of the recipient or the date on which payment is credited to his bank account. |
Let us understand this further with examples.
Scenario 1
| Date of invoice | Date of receipt of payment | Time of supply of goods |
| 20th July, 2017 | 10th August, 2017 | 20th July, 2017 |
In the above scenario, the time of supply will be 20th July, 2017. The reason being, the time of supply will be the earliest of date of invoice or receipt of payment. In this case, the date of invoice is earlier than the date of receipt of payment.
Scenario 2
| Date of invoice | Date of receipt of payment | Time of supply of goods |
| 5th September, 2017 | 25th August, 2017 | 25th August, 2017 |
In the above scenario, the time of supply will be 25th August, 2017. The reason being, the time of supply will be the earliest of date of invoice or receipt of payment. In this case, the date of receipt of payment (advance receipt) is earlier than the date of invoice.
Scenario 3
| Date of invoice | Receipt of payment entered in books of account | Receipt of payment credited to bank account | Time of supply of goods |
| 10th September, 2017 | 29th August, 2017 | 3rd September, 2017 | 29th August, 2017 |
In the above scenario, the time of supply will be 29th August, 2017. The reason being, time of supply will be the earliest of date of invoice or receipt of payment. The date of receipt of payment will be the earliest of:
- The date on which the payment is entered in the books of accounts or
- The date on which the payment is credited to the bank account.
In this case, the date on which the receipt of payment is entered in the books of account is earlier than the date on which payment is credited to the bank account. Hence, the time of supply will be 29th August, 2017.
Scenario 4
| Date of invoice | Receipt of payment entered in the books of account | Receipt of payment credited to bank account | Time of supply of goods |
| 10th September, 2017 | 31st August, 2017 | 5th September, 2017 | 31st August, 2017 |
In the above scenario, the time of supply will be 31st August, 2017. The reason being, time of supply will be the earliest of date of invoice or receipt of payment. In this case, the date on which payment is credited to the bank account is earlier than the date on which payment is entered in the books of account.
Scenario 5
| Goods removed for supply | Receipt of payment | Time of supply of goods |
| 25th August, 2017 | 5th September, 2017 | 25th August, 2017 |
In the above scenario, the date of invoice is not available. Here, the time of supply will be the earliest of last day to issue invoice and receipt of payment. The last date to issue the invoice, in case of supply involving movement of goods, will be at the time of removal of goods. Hence, the time of supply will be 25th August, 2017. This is because the date of removal of goods is earlier than date of receipt of payment.
Coming Soon
What is Time of supply for Goods on Reverse Charge?
