EXAMPLE

Rahul Ltd. entered into an agreement with QRS Ltd for construction of a new building to be used primarily for commercial purpose for a total consideration of Rs. 200 lakh on 02.07.2017.  As per terms of contract Rahul Ltd. is required to make payment at different stages of completion of the building namely 50%, 75% and 100%.

Determine the time limit for issue of invoice u/s 31 and Time of supply using details given as under:-

 

STAGE

Date

Date of Issue of

Invoice

 

Date of Payment

 

Amt of work done

 

Initial booking

 

50% completion

of building

 

75% completion

of building

 

100% completion

of building

 

 

02.07.2017

 

20.09. 2017

 

 

28.03.2018

 

 

 

30.09. 2018

02.07.2017

 

22.09. 2017

 

 

30.04. 2018

 

 

 

30.09. 2018

02.07. 2017

 

18.09. 2017

  

 

30.04. 2018

 

 

 

08.10. 2018

 

 

20 Lakh

 

80 Lakh

 

 

50 lakh

 

 

 

50 lakh

  ANSWER

continuous supply of services has been defined under section 2(33). It means a supply of service which is provided, or agreed to be provided, continuously or on recurrent basis, under a contract, for a period exceeding three months with periodic payment obligations and includes supply of such service as the Central or a State Government may, whether or not subject to any condition, by notification, specify.

 

As per section 31(5), in case of continuous supply of service invoice is required to be issue before or on the following dates:-

 

Where the due date of payment is ascertainable from the contract- the invoice shall be issued on or before due date of payment.

 Where the due date of payment is not ascertainable from the contract- the invoice shall be issued on or before each such time when the supplier of service receives the payment.

Where the payment is linked to the completion of an event - the invoice shall be issued on or before time of completion of that event.

 

 

According to above definitions, supply of construction service shall fall in the ambit of continuous supply of services.

 

As due date of payment is determinable, therefore, invoice shall be issued on or before due date of payment.

 

Time of supply in case of above services will be as ascertained in below table;

 

STAGE

Remarks

Relevant events

 

Time of supply (earlier of relevant events)

 

Amt of work done

 

Initial booking

 

 

 

50% completion

of building

 

 

75% completion

of building

 

 

100% completion

of building

 

 

Invoice issue

(within time)

 

 

Invoice not issue

(within time)

 

 

Invoice not issue

(within time)

 

 

Invoice issue

(within time)

 

 

Date of invoice or

Payment

 (Whichever is earlier)

 

Provision of supply or

Payment

 (Whichever is earlier)

 

Provision of supply or

Payment

 (Whichever is earlier)

 

Date of invoice or

Payment

 (Whichever is earlier)

 

 

02.07. 2017

 

 

 

 

18.09. 2017

  

 

 

28.03.2018

 

 

 

30.09. 2018

 

20 Lakh

 

 

 

 

80 Lakh

 

 

 

50 lakh

 

 

 

50 lakh