Time of Supply – Reverse Charge.
Where tax is payable on reverse charge basis, the time of supply is appointed to be the earliest of (a) date of receipt of goods, (b) date of payment or (c) 30 days from the date of issue of invoice by the supplier. If for any reason, one of these three dates cannot be determined then the time of supply will be the date of recording the supply in the books of the recipient.
Keeping in mind the definition of reverse charge in section 2(98), the above provision does not apply to payment of tax by an electronic commerce operator but only to those cases of supply which fall under sub-section 5 of section 9 of the Act.
Exception:
Date of receipt of payment shall be the date on which the payment is accounted in the books of the supplier or the date reflected in the bank account of the supplier, whichever is earlier. Reverse charge in case of goods may arise either under Section 9(3) or Section 9(4) of the CGST Act, 2017. Section 9(3) empowers the issuance of notification by the Government under which the tax will be paid by the recipient of goods as per reverse charge mechanism.
Notification no. 4/2017-CT (rate) dated 28th June 2017 and Notification no. 43/2017-CT (rate) dated 14th November 2017 provides the list of goods which will be subject to reverse charge mechanism subject to the category of supplier and recipient specified therein. These goods include cashew nuts (not shelled or peeled), bidi wrapper leaves (tendu), tobacco leaves, raw cotton, silk yarn, supply of lottery etc.
Section 9(4) requires the recipient of goods/services to pay tax if it is registered and receives inward supplies from unregistered suppliers. However, the applicability of this provision of reverse charge is deferred from 13th October 2017 till 30th June 2018. However, it was applicable for intra state supplies subject to the aggregate amount of such supplies exceeding ` 5000 in a day and all interstate supplies without any limit till 12th October 2017.The time of supply under both the provisions of Section 9(3) and Section 9(4) will be calculated as per the dates given above.
Illustration 12: Mr.X, an agriculturist supplies raw cotton (under reverse charge) to Mr. Y who manufactures cotton shirts. The date wise turnout of events are given below:
01.04.2018- Mr.Y approaches Mr.X and places an order for 2 tonnes of cotton
10.04.2018- Mr.Y receives the goods
15.04.2018- Mr.X issues an invoice
20.04.2018- Mr.Y makes a payment by cheque and accordingly records it in his books of accounts.
25.04.2018- The payment gets debited from Mr.Y’ s bank account What will be the time of supply in the given case?
Answer: The time of supply shall be the earlier of the following dates:
a. the date of receipt of goods i.e. 10.04.2018 b. the date of payment as recorded in the books of Mr.Y i.e. 20.04.2018 or the date when the payment gets debited in the books of the recipient i.e. 25.04.2018 whichever is
earlier
c. the date immediately following thirty days from the date of issue of invoice, i.e. 15.04.2018+30days+1day=16.05.2018
Therefore, the time of supply will be 10.04.2018.