Key Judgments: Goods in transit, Variants of advances, Corpus Fund

| Last updated: 09 June 2022

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This article clarifies the crucial concept of 'Time of Supply' under Indian GST law, which determines when tax liability arises. It details the rules for goods and services, including specific scenarios like goods in transit, various types of advances received for services, and the treatment of corpus or sinking funds. Key judicial pronouncements are highlighted to provide practical insights into these complex areas.

Once supply is made it is crucial to determine the Time of supply "event triggering the liability". Therefore it is of utmost importance to understand the time of supply which is provided in Section 12/13/14 of CGST Act,2017 and section 20 of IGST Act,2017.

Time of Supply

For Goods

For Services

S.12(2) Time of supply of goods shall be earlier of the following:

Date of issue of invoice or last date on which invoice is required under section 31 to issue the invoice w.r.t supply.
Date when supplier receives the payment.

S.13(2) Time of supply of service shall be earlier of the following:

Date of issue of invoice (u/s 31 of CGST Act) or Date when supplier receives the payment
Date of provision of service if invoice is not issued upto last date on which invoice is required under section 31
Date on which recipient shows the receipt of service in his books.

Where the supplier of taxable goods received an amount exceeding Rs.1000/- from an invoice amount may determine time of supply at the date of issue of invoice.

For the purpose of recipt of payment the date when supplier records such payment or credits in a bank account.

For Reverse charge basis

Dt of recipt of goods ;
Dt of payment recorded by supplier or debited in suppliers bank account.
30days from Dt of issue of invoice or Dt of payment

For Reverse charge basis

Dt of payment recorded by supplier or debited in suppliers bank account.
60days from Dt of issue of invoice or Dt of payment

Supply of Voucher [S.12(4) &13(4)]

Date of issue of voucher if supply is identifiable at that point.
Date of redemption of voucher.

Misc. Supply [S.12(5) &13(5)]

In case where periodical returns has to be filed , the date on which such returns are to be filed.
In other cases be the date on which tax is paid.

Time of Supply Rules: Goods, Advances and Corpus Funds

Key Judgements

Goods in Transit

In an advance ruling sought by Pasco Motors LLP the (AAR) Authority has ruled that time of supply would be determined as per section 13 therefore the Liability for goods would attract on removal or delivery or issuance of invoice (whichever is earlier) . However the ITC can be claimed on such goods only on receipt of such goods. Therefore, Utmost care shall be taken while considering goods in transit because Liability gets attracted to supplier and the recipient without receipt of such goods cannot claim ITC.

Variants of advances

For provision of service GST liability arises on receipt of advances as per section 13(2)(a). same shall also be disclosed in GSTR-1 along with adjustments in the respective months. In case of refund of such advance the liability on the same shall be reversed by issuing refund voucher.

In re SP Singla Construction (P.) Ltd [2022] 138 taxmann.com 36 (AAR - GUJARAT)[07-03-2022]

Mobilization advance

Advances shall be repaid on non-satisfaction from service is not repayment of whole advance received but only of the part unsatisfaction/unapplied left out portion. Therefore such receipt & refund of advances shall be appropriately dealt.

Interest bearing Advances

Advances for supply of service in whatever substance would attract GST on its receipt. The terminology or variants used in the contract would not affect the provision for advance under the CGST Act,2017.

Counter Bank Guarantee in lieu of advances

Bank Guarantee against Advances received is usually reduced on stage-completion This is the agreement of the contracting parties and this contractual Bank guarantee shall not obscure the provision of Time of Supply for services on advances received.

Further deduction of TDS clarifies that the consideration is for supply of service and not deposits

Similar Siemens Ltd ruling is passed by [2019] 112 taxmann.com 366 (AAAR-WEST BENGAL)

Corpus / Sinking fund

In an advance ruling of Vaishnavi Splendour Home Owners AAR ruled that the corpus/sinking fund collected by is collected for the future supply of service and accordingly gets applied for consideration towards the supply of service only at the time of actual supply of service. Therefore, such an amount is liable to GST not at the time of collection but at the time of actual supply.

(Note: The amount collected in the nature of the corpus/sinking fund is in the nature of deposits and not advances. Hence consideration received is not for the specific supply so no liability would be determined as per section 13 of the CGST Act,2017. Alternatively, if fund is specific collected for specified supply like repairing, constructing drainage system etc. it would be liable to GST on the collection itself )