Question3:
The tax rate at the time of issuing original invoice was 28%. It was reduced to 18% on 15th Nov 17. The goods were removed for supply with 28% tax rate in August 17. The payment of this invoice was already received as ‘advance payment’ from the customer. The prices of these goods were revised upwards on 1st Jan 18 retrospectively with effect from 1.7.2017. The upward revision of the prices has been accepted by our customer. In my opinion, in this situation, a debit note under Section 34(3) needs to be issued for the differential price with the tax rate prevalent at the time of issuing of original invoice (28%). However, our customer is insisting ‘a supplementary invoice’ for the differential price with current tax rate (18%) invoking the provisions of Section 14 of the CGST Act.
Kindly advice the correct position of law.
Answer:
Section 14 in CGST Act contains provisions relating to "time of supply in case of change in rate of tax"
but according to our view section 14 is applicable
only when few events (i.e supply of goods or service, payment, issuing of
invoice) has been made before change in rate of tax and few events is made after
the change in rate of tax.
but according to the fact narrating in your query all the events like issue of
original invoice for supply, supply of goods and payment for original invoice is
already taken place prior to the change in rate of tax. So Time of supply in
your case is prior to the 15th Nov 2017(date on which change in rate takes
place).
Whereas according to section 34(3) Debit note shall be issued for increase in value which shall be issued corresponding to the tax invoice original issued for that supply . so their is no question of again determination of time of supply in case of debit note. Thus rate is applicable on debit note is 28%.
So far as question of debit note or supplementary invoice is concerned both are possible as per explanation of section 34 as follows:-
Explanation ''For the purposes of this Act, the expression 'debit note' shall include a supplementary invoice. (Reply dt. 20/3/2018)