Time of Supply for Assembly and Installation of Goods under VAT

Tally Solutions | Updated on: February 4, 2020

For a supply which involves installation or assembly of goods by the supplier, the time of supply will be the earliest of the date when assembly or installation is completed, the date of receipt of payment and the date of tax invoice.

Time of supply in case of Assembly or installation of goods

Assembly or Installation

Earliest of the following

Date on which the assembly or installation is completed

Date of Receipt of Payment

Date of Tax Invoice

The suppliers engaged in a supply which requires assembly or installation, need to pay a special attention in determining the date of completion of assembly or installation. Here, the date of transportation of the goods by the supplier to the customer's site where such assembly or installation is carried out is not the time of supply. Rather, the date when the services of assembly and installation are completed would be the time of supply in relation to the goods so transported.

Let us understand the time of supply in case of assembly or installation with examples.

Examples of Time of supply for Services

Note: For the purpose of understanding the time of supply, in the following examples, we have considered the VAT Return Period of Monthly and Quarterly (Jan-Mar'18).

Max Ltd, a construction company registered in Dubai, UAE, entered into a contract with Stamps Ltd. to supply and install manufacturing plants. The installation of manufacturing plant at Stamps Ltd.'s site located in Ajman is expected to be completed in 3-4 months.

Considering the above example, we have created different scenarios to understand the determination of time of supply in case of assembly or installation.

Scenario-1

Date of Contract	Date of Completion of Assembly or Installation	Date of Invoice	Date of Receipt of Payment	Time of supply for Services	Return Period (Period In which VAT needs to be reported and paid)
1st Jan,2018	25th March, 2018	5th April,2018	10th April,2018	25th March,2018	Monthly	Quarterly
					March '18	Jan-Mar'18

In the above scenario, the time of supply will be 25th March, 2018. The reason being, the time of supply will be the earliest of:

Date of completion of assembly or installation
Date of invoice
Date of receipt of payment

In this case, the date on which assembly or installation completed is earlier than the date of tax invoice and the date of receipt of payment. Accordingly, the output VAT needs to be reported and paid for Jan-Mar'18, if it is quarterly return and March'18, if it is monthly return.

Scenario-2

Date of Invoice	Date of Completion of services	Date of reciept of Payment	Time of Supply for Services	Return Period (Period in which VAT needs to be reported and Paid)
10th April, 2018	5th April,2018	15th March,2018	15th March,2018	Monthly	Quarterly
				March '18	Jan-Mar'18

In the above scenario, the time of supply will be 15th March, 2018. The reason being, the time of supply for services will be the earliest of:

Date of completion of services
Date of invoice
Date of receipt of payment

In this case, the date of receipt of payment is earlier than the date of invoice and date of completion of services.

Scenario-3

Date of Contract	Date of Completion of Assembly or Installation	Date of Invoice	Date of Receipt of Payment	Time of supply for Services	Return Period (Period In which VAT needs to be reported and paid)
1st Jan,2018	5th April, 2018	10th April,2018	15th March,2018	15th March,2018	Monthly	Quarterly
					March '18	Jan-Mar'18

In the above scenario, the time of supply will be 25th March, 2018. The reason being, the time of supply for services will be the earliest of:

Date of completion of services
Date of invoice
Date of reciept of payment

In this case, the date of completion of services is earlier than the date of invoice and date of receipt of payment.

Conclusion

The supplier engaged in the supply of goods which requires assembly or installation, needs to take an extra care in determining the date of completion of assembly or installation. This is because, completion of assembly or installation is dynamic and varies on the basis of product supplied, customer to customer and site at which installation or assembly is carried. It is advisable to examine the exact activities involved in assembly or installation in terms of the contract or as per normal trade practice, where the contract does not explicitly provide the activities involved in assembly or installation. Any lapse in accurate determination of time of supply will have a dent on the cash flow of the business by way of penalties or early payment of VAT.