EXAMPLE

Mr. A visited a bike shop and wanted to buy a bike whose cost was Rs. 50000. He paid 50% of the price in advance and agreed to pay rest of the amount in 10 equal installments with interest. However, possession of bike was transferred but the title of transfer of goods and bill of bike  was to be handed over to the customer on the future date upon making full and final payment in 10 installments.

(a)  Whether this type of transaction is covered under purview of supply under GST.
(b) If yes, then when the invoice is required to be issue and what will be the point of taxation for GST

ANSWER

(a) Supply of goods on hire purchase shall be treated as supply of goods as there is transfer of title, albeit at a future date.

Schedule II of GST also specifies that any transfer of title in goods under an agreement which stipulates that property in goods shall pass at a future date upon payment of full consideration as agreed, is a supply of goods.

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(b) The date on which invoice required to be issued is to be decided as per section 31(1).  According to this section two events have been specified when invoice is required to be issued, first, where supply involve movement of goods then invoice should be issued at the time of removal of goods, and secondly, in any other case, invoice should be issued at the time of delivery of goods. According to the said situations under section 31(1) invoice will be issued.

 

For our example, invoice is required to issue at the time when bike is handed over to the customer.

 

Further, time of supply is defined in section 12 of GST. It provides that time of supply of goods shall be the earliest of the following dates:-

(a)  Date of issue of invoice

(b)  Last date on which invoice required to be issued

(c) Date on which supplier receives payment

 

Thus in the given example date of issue of invoice is the date of removal of goods, then such date is the time of supply, otherwise also date of removal is the time of supply.