EXAMPLE-55

Rama & Associates provide consultancy service on monthly basis for Rs 50000. As per agreement fees for consultancy accrues on the last day of the relevant month. Hence, the service gets completed on the last day of the relevant month. For the month of July services bill is raised by 5^th August but cheque is received on 30^th July and deposited in bank on the same day. However, credited in the Bank account on 7^th august. In between GST rate changed from 15% to 18% on 1^st August. Determine Time of supply and relevant rate of taxation.

Answer

Explanation of section 14 also specifies that the time of supply would be decided according to the date on which supplier receives the payment or the date on which payment is entered in books of account or payment credited in his bank account, whichever is earlier. However proviso to this section further provides that date of receipt of payment would be the date of credit in the bank account if such credit in bank account is after 4 working days from change in rate of tax.

In view of the above provision, in present example, date of credit is 6^th working day after the change in rate of taxation. Thus, the date of credit (7/08/2017) shall be considered as the date of payment.

As per section 14, if in case supply of services is made before the change of rate of tax i.e. 31^st  July and raising of invoice and receipt of payment are both after change in tax rate, then     time of supply shall be date of receipt of payment or                                                                                     date of issuing invoice, whichever is earlier

In view of the above provision, date of payment is 7.08.2017 and date of invoice is 05/08/2017. Thus, earlier date 05/08/2017 shall be the time of supply and tax rate of 18% will be applicable in supply of services.