Determination of Effective Tax Rate and Time of Supply when there is a Change in Tax Rate

The entire country is abuzz with the GST rate revisions recommended yesterday, i.e on 03/09/2025. to be effective from 22nd September 2025. Let us understand the determination of the Time of Supply and the applicable tax rate in this context

Section 14 says, regardless of Section 12 and Section 13. The Time of Supply shall be determined when there is a change in the effective tax rate, as written below.

The issue arises when out of the events that are Date of completion of supply, Date of Invoice and Date of Payment, some of these events fall before and others after the date of rate change.

The Dominant Rule

As per the law, when there is a change in the effective tax rate, we consider the majority of the three events (2 out of 3).

If two events fall before the change, the old rate applies.

If two events fall after the change, the new rate applies.

Illustrations

Example 1

Particulars Date

Date of Completion of Supply 15-09-2025
Date of Invoice    18-09-2025
Date of Payment   25-09-2025

Out of 3 events, 2 dates fall before 22-09-2025.

Hence, the old GST rate is applicable.

Time of Supply = Date of Invoice = 18-09-2025 (since Date of Completion cannot be taken).

Example 2

Particulars Date

Date of Completion of Supply 15-09-2025
Date of Invoice 25-09-2025
Date of Payment 26-09-2025

Out of 3 events, 2 dates fall after 22-09-2025.

Hence, the new GST rate is applicable.

Time of Supply = Date of Invoice = 25-09-2025 (whichever earlier between invoice/payment).

Date of Payment (Rule 4A)

If payment is made within 4 working days from the date of change, the date of entry in books or date of deposit in bank (whichever earlier) shall be considered as the Date of Payment.

If payment is made after 4 working days, then the date of deposit in the bank shall be taken as the Date of Payment.

Summary Table

With these rules, businesses can determine the correct GST rate and avoid disputes during transitions in tax laws.

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