RIGHT TIME TO DEPOSIT GST
The Voice of Chandigarh News
Goods and Service Tax (GST) implementation is one of the biggest tax reforms in India since independence.
Earlier our country was working under a dual system of taxation of goods and services. Taxes on goods was described as “VAT” which was charged at both the Central and State level. Later on, service tax was introduced in the year1994, it was chargeable on providing of services. For instance services of an Architect, Chartered Accountant, IT consultants, Labour Contractors etc., a few services were exempted namely Medical, Advocate and Education etc.
These taxes are called Indirect tax which supplier (seller) collects from the buyer on every supply (sale) of goods and services and eventually deposit with Govt (Central or State) in the prescribed time and manner. Before GST regime, there were following indirect taxes which are subsumed in Goods and Service Tax (GST):
Central Indirect Taxes:
(1) Customs Duty,
(2) Central Excise Duty
(3) Central Service Tax
State / Local Indirect Taxes:
(2) Luxury Tax
(3) Entertainment Tax
- Octroi and other Entry tax etc.
After rolling out of GST on 1stJ uly, 2017, these taxes have been merged into GST except in case of supply of few products.
Levy and Collection of GST: as per the new mechanism, there shall be levied a tax, called GST, on all the supplies (sale of Goods and services or both) within the State (called Intra state supply) and out of the State (called Inter State supply), except on alcohol liquor for human consumption, petroleum crude, high speed diesel, motor spirit, natural gas and aviation turbine. These products will be covered in GST later on as per the recommendations of the GST Council.
In simple words, supplier (seller) of the goods and services is liable to deposit GST with the Govt. on every sale of goods or services, Supplier shall deposit the GST applicable on that product or service, unless it is specifically exempted for charging GST on its supply.
Here the key question arises is, when the supplier is liable to deposit GST with Govt. which was collected on supply of goods and services and within what time frame.
It is a general perception that responsibility to deposit GST is arisen only after issuing an Invoice. If I have not issued an invoice than there is no responsibility arises to deposit GST.
Liability to deposit GST arises at the time of supply. Time of supply is a point, from where period starts within which supplier is required to deposit GST in the Government account. We all know that GST collected in a month shall be deposited by 20thof next month (as per current provisions) through monthly Return – GSTR 3B.
Now, we need to understand when Time of Supply arises. Central Goods and Service Tax Act (CGST) has specified guidelines for determining the time of supply of goods and time of supply for services, separately.
Time of Supply of Goods
Time of supply of Goods is earliest of the following dates:
- Date of Invoice issued, or
- The last date on which he is liable to issue the invoice i.e. at the time of delivery of goods, or
- The date on which the supplier receives the payment
If any one of the three events happens, supplier is liable to deposit the GST.
For instance: (a) if a customer intends to buy a TV. He will go to a TV showroom and ask for a TV of his choice. Salesmen will show it and pack the TV selected by the customer. Now a monetary transaction will take place. Seller will issue an invoice and give it the buyer alongwith TV and collect the sale price included GST.
(b) In the second instance, a Customer came to showroom and buys a TV of his choice and promise to pay after two months. Here delivery of goods takes place. Supplier is required to issue invoice on delivery of goods (TV) and shall deposit GST by 20th of next month. Eventhough he has not received a single penny from the customer.
(c) In the third instance, a customer came to showroom but TV of his choice is not available and is in high demand. Customer deposits advance and book it, which will be delivering after two months. Now, supplier is required to deposit GST on advance received from the customer by 20th of next month. Here, he will deposit GST on advance received only. Remaining GST will be deposited when TV will deliver after two months.
Time of Supply of Services
Time of supply of Services is earliest of the following dates:
- Date of Invoice issued, or
- In case of supply of services,invoice is required to be issued within 30 days of providing of services, or
- The date on which the supplier receives the payment, or
- The date on which recipient shows the receipt of services in his books of accounts.
Hence, we have to consider and understand these simple concepts. So that, we can discharge our statutory liabilities on time and flawlessly.