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Determining Time of Supply u/s 14 of CGST Act: Implications for Tax Rate Changes

CA. Bhavik P. Chudasama , Last updated: 05 June 2024  
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The Goods and Services Tax (GST) regime in India is a dynamic system, with tax rates subject to revisions by the Government. Section 14 of the Central Goods and Services Tax (CGST) Act, 2017, plays a crucial role in determining the applicable tax rate for supplies made during periods of such rate changes. This article provides a detailed analysis of Section 14 and its implications for businesses.

Core Function of Section 14

The primary function of Section 14 is to establish the exact point of time of supply in case of change in rate of tax of goods or service of both for purpose of levying GST at New Rate or Old Rate.

Determining Time of Supply u/s 14 of CGST Act: Implications for Tax Rate Changes

The time of supply is a critical concept under GST. It determines the tax period in which a supply is considered to have been made and the applicable tax rate. In general, the time of supply is the earlier of the following three events:

  • The date of the invoice issued by the supplier;
  • The date on which the goods are delivered or the services are rendered; or
  • The date on which payment is received for the supply.

Section 14 doesn't directly define "supply" itself. However, it clarifies when a supply is considered to have occurred based on the timing of payment, issuance of Invoice and Supply of Goods/Services or Both.

This indirectly impacts the tax liability associated with the supply. This is particularly relevant when the tax rate applicable to a particular supply undergoes a change. The section dictates whether the tax rate prevailing at the time of supply or the revised rate applies.

It must be noted that section 14, overrules section 12 (time of supply of goods) and section 13 (time of supply of services). In Simple words, in case of the change in rate of tax only Section 14 is to be referred for determining Time of Supply of Goods or services of Both

 

Key Provisions of Section 14: Basically Section is divided in two Main Parts

  1. When goods or services or both have been suppliedbefore the change in the rate of tax (i.e. supply affected before the change in rate); and
  2. When goods or services or both have been supplied after the change in the rate of tax (i.e. supply affected after the change in rate):

Let us analyze the first part i.e. supply being affected before the change in rate with the table provided below

Supply of Goods/Services

Issuance of Invoice

Payment Received Date

Time of Supply

Applicable Rate

Before Rate Change

After Rate Change

After Rate Change

Date of payment or date of invoice, whichever earlier

New Rate

Before Rate Change

Before Rate Change

After Rate Change

Date of Invoice

Old Rate

Before Rate Change

After Rate Change

Before Rate Change

Date of payment

Old Rate

Let us analyze the second part i.e. supply being affected after the change in rate with the table provided below

Supply of Goods/Services

Issuance of Invoice

Payment Received Date

Time of Supply

Applicable Rate

After Rate Change

Before Rate Change

After Rate Change

Date of payment

Old Rate

After Rate Change

Before Rate Change

Before Rate Change

Date of payment or date of invoice, whichever earlier

New Rate

After Rate Change

After Rate Change

Before Rate Change

Date of Invoice

New Rate

Determining the Date of Payment

Section 14 provides an explanation for determining the "date of receipt of payment." This date serves as the benchmark for ascertaining the applicable tax rate. There are two options:

  • The date the payment is recorded in the supplier's books of account.
  • The date the payment is credited to the supplier's bank account.

The earlier of these two dates is considered the "date of receipt of payment" for the purpose of Section 14

 

Conclusion

Section 14 of the CGST Act plays a vital role in ensuring clarity and consistency in applying GST during periods of tax rate changes. By understanding the concept of time of supply and its link to the date of payment, businesses can ensure they comply with the relevant tax regulations and avoid any potential discrepancies in their GST filings.

Disclaimer: We request readers to seek professional advice before arriving at any decision/conclusion after reading. We are not responsible for any loss arising to anyone after referring and relying on this article. Above views are based on our understanding of the provisions

The author can be reached at office.bhavikco@gmail.com

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Published by

CA. Bhavik P. Chudasama
(Practice)
Category GST   Report

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