Time of Supply – Reverse Charge
Where tax is payable on reverse charge basis, the time of supply is appointed to be the earlier of date of payment or 60 days from the date of issue of invoice by the supplier. If for any reason, one or all of these two dates cannot be determined then the time of supply will be the date of recording the supply in the books of the recipient.
In case of transactions between ‘associated enterprises’ where the supplier of service is located outside India, the date of recording the supply in the books of the recipient or the date of payment whichever is earlier, will be the time of supply.
Again, please note that in view of 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.
Exceptions:
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.
Illustration 8: Mr. X provides legal services as an advocate to Mr.Y which fall under reverse charge basis.
10.04.2018 – The services are provided to Mr.Y
12.04.2018 – Mr. X issues an invoice to Mr.Y
10.07.2018 – The payment is made by Mr.Y through a cheque and recorded in his books of accounts
15.07.2018 – The payment gets debited from Mr. Y’s bank account What will be the time of supply?
Answer: The time of supply shall be earlier of the following dates:
The date of payment i.e. 10.07.2018 (earlier of 10.07.2018 and 15.07.2018)
The date immediately following sixty days from the date of issue of invoice i.e. 12.06.2018 (12.04.2018+60days+1day)
Therefore, the time of supply shall be 12.06.2018.