Point of Taxation in GST

Point of Taxation in GST

So we are now with new informative article in GST which will help you to understand how and when GST will be payable by dealers. Today lets understand Point of Taxation in GST regime.

So far as our existing laws like VAT, CST, Central Excise, Service Tax are concern there are difference rules for point of taxation like in Central Excise point of taxation is at the time of manufacturing of goods and payable on removal of goods, in CST and VAT point of taxation generally is at supply of goods while in service tax it is governed by the Point of Taxation rules 2011. But now in GST there are common rules for goods and services. So lets now go deeper to understand better how point of taxation in GST will work.First of all we need to understand that in GST regime new concept call “supply” is introduced. supply includes supply of goods and services. Here point of taxation will be governed by time of supply.

Definition of Supply

Supply includes

(a) 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.

(b) importation of service, whether or not for a consideration and whether or not in the course or furtherance of business

(c) a supply specified in Schedule I, made or agreed to be made without a consideration.

In nutshell supply means Supply includes all forms of supply (goods and / or services) and includes agreeing to supply when they are for a consideration and in the course or furtherance of business (as defined under Section 3 of the Act).

It specifically includes:

(i) Sale

(ii) Transfer

(iii) Barter

(iv) Exchange

(v) License

(vi) Rental 

(vii) Lease

(viii) Disposal

Time of supply of goods:

The time of supply of goods shall be the earliest of the following dates, namely,-

(a)   (i) the date on which the goods are removed by the supplier for supply to the recipient, in a case where the goods are required to be removed or

(ii) the date on which the goods are made available to the recipient, in a case where the goods are not required to be removed; or

(b) the date on which the supplier issues the invoice with respect to the supply; or

(c) the date on which the supplier receives the payment with respect to the supply; or

(d) the date on which the recipient shows the receipt of the goods in his books of account.

Point of Taxation in GST

Time of Supply of services

(1)The liability to pay CGST/SGST on services shall arise at the time of supply, as determined in terms of the provisions of this section.

(2) The time of supply of services shall be:-

(a) the date of issue of invoice or the date of receipt of payment, whichever is earlier, if the invoice is issued within the prescribed period; or

(b) the date of completion of the provision of service or the date of receipt of payment, whichever is earlier, if the invoice is not issued within the prescribed period; or

(c) the date on which the recipient shows the receipt of services in his books of account, in a case where the provisions of clause (a) or (b) do not apply.

So from the above we conclude as below with regards to time of supply of goods has now no relevance with manufacturing of goods, now point of taxation will be earlier of removal of goods or availability of goods to seller, issuance of invoice, receipt of payment. while in case of services it is earlier of receipt of payment, completion of services.

Now unlike earlier GST will be payable on advance receipt of goods and services. as per definition of supply of goods and service even goods and services supplied without consideration is also liable to GST. So any sample, free services, any complementary services or goods, schemes like 1 + 1(free) will also be liable to GST.

So that’s it for today we will be back with some informative article soon…

Ref: Model GST law – 2016

Author: smit shah

I am a passionate Chartered Accountant having deep interest in taxation with combination of blogging.

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