Introduction
Goods and Services Tax (GST) is an indirect tax that has been implemented in India since July 1, 2017. It has replaced multiple indirect taxes such as Central Excise Duty, Service Tax, Value Added Tax, etc. and has brought about a uniform tax structure across the country. In this article, we will discuss the value of supply and time of supply under GST in detail.
Value of Supply:
The value of supply is an important aspect of GST as it determines the tax liability on a transaction. The GST law defines the value of supply as the transaction value which is the price actually paid or payable for the goods or services. The transaction value includes all expenses such as packing, commission, delivery charges, etc. incurred by the supplier in relation to the supply of goods or services.
In case the transaction value cannot be determined, the GST law provides for the following methods to determine the value of supply:
Residual method: In this method, the value of supply is determined by subtracting the profit margin from the sale price of goods or services that are similar to the ones being supplied. This method is generally used when the transaction value cannot be determined due to related party transactions.
Cost-plus method: In this method, the value of supply is determined by adding a reasonable profit margin to the cost of production or purchase of goods or services.
Computed value method: In this method, the value of supply is determined by computing the cost of production, marketing, and distribution of the goods or services being supplied. This method is generally used for goods that are imported.
Time of Supply:
The time of supply refers to the point in time when the liability to pay tax arises. The GST law provides for different time of supply rules for goods and services.
Time of Supply for Goods:
The time of supply for goods is determined based on the following events:
- Date of issue of invoice: If the invoice is issued within the prescribed time limit, the time of supply is the date of issue of invoice.
- Date of receipt of payment: If the payment is received within the prescribed time limit, the time of supply is the date of receipt of payment.
- Date of delivery of goods: If the goods are delivered or made available to the recipient, the time of supply is the date of delivery or making the goods available.
- Date of entry in books of accounts: If the above events do not apply, the time of supply is the date on which the supplier enters the transaction in his books of accounts.
Time of Supply for Services:
The time of supply for services is determined based on the following events:
- Date of issue of invoice: If the invoice is issued within the prescribed time limit, the time of supply is the date of issue of invoice.
- Date of receipt of payment: If the payment is received within the prescribed time limit, the time of supply is the date of receipt of payment.
- Date of completion of service: If the service is completed before the issuance of the invoice, the time of supply is the date of completion of service.
- Date of entry in books of accounts: If the above events do not apply, the time of supply is the date on which the supplier enters the transaction in his books of accounts.
Conclusion:
The value of supply and time of supply are important aspects of GST as they determine the tax liability on a transaction. The value of supply is generally based on the transaction value, but if it cannot be determined, the GST law provides for other methods to determine the value of supply. The time of supply is determined based on specific events such as the issuance of invoice, receipt of payment, delivery of goods, completion of service, etc. It is important for taxpayers to understand the value.
This article is written by Satyam during his internship.
