How to Determine Time of Supply of Goods

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Tally Solutions, Feb-04-2020

For the supply of goods, the time of supply needs to be determined considering the occurrence of various transactions related to that supply. The following are the dates which need to be considered for arriving at the time on which the VAT liability will arise.

Time of Supply of Goods

Earliest of the following

Date of Transfer of Goods

The date on which goods were transferred, if such transfer wasunder the supervision of the supplier.   If it is not under the supervision of the supplier, it will be the date on which the recipient of goods took possession of the goods

Date of Receipt of Payment

This implies the date on which you have received payment for a taxable supply which includes advance receipt as well.

Date of Tax Invoice

Date on which the tax invoice is issued. The last date to issue tax invoice is within 14 days from the date of supply.

As mentioned in the above table, the earliest occurrence of any of the above dates will be considered as the time of supply. If you closely observe, the date of transfer of goods is distinguished based on 'supervision of the supplier'. Basis of this, the date to arrive for goods transferred differs.

If the goods are transferred under the supervision of the supplier, the date of such transfer will be considered as the time of supply.

For example, A-One Spare Ltd located in Dubai, supplied spare parts to Speed Motors Ltd, located in Sharjah, UAE. A-One Spare Ltd delivered the goods to the factory gate of Speed Motors Ltd. All the risk and responsibility till the goods reach the factory gate of Speed Motors Ltd is with A-One Spare Ltd. Here, the example clearly stipulates that the goods are transferred under the supervision of the supplier i.e. A-One Spares Ltd . Accordingly, the date of transfer can be applied in arriving at the time of supply.

If the transfer of goods is not under the supervision of the supplier, the date on which the recipient took possession of the goods will be considered as the time of supply.

For example, A-One Spare Ltd , supplied spare parts from its ex-factory gate to Speed Motors Ltd, located in Sharjah, UAE. In other words, the Speed Motors Ltd took the delivery of goods from the factory outlet of A-One Spare Ltd. Here, goods are not transferred under the supervision of the supplier and date on which the recipient i.e. Speed Motors Ltd took possession of the goods will be applied in arriving at the time of supply.

Let us understand the time of supply for goods considering different business scenarios with examples.

Examples of Time of Supply for Goods

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).

Scenario -1

Date of Invoice

Date of Delivery of Goods

Date of Receipt of Payment

Time of Supply of Goods

Return Period (Period In which  VAT needs to be reported and Paid)

20th March, 2018

5th April,2018

10th April,2018

20th March,2018

Monthly

Quarterly

March '18

Jan-Mar'18

In the above scenario, the time of supply will be 20th March, 2018. The reason being, the date of supply will be the earliest of:

  • Date of transfer
  • Date of invoice
  • Date of receipt of payment

In this case, the date of invoice is earlier than the date of transfer and date of receipt of payment. Accordingly, the output VAT needs to reported and paid for Jan-Mar'18, if it is quarterly return and March 2018, if it is monthly return.

Scenario -2

Date of Invoice

Date of Delivery of Goods

Date of Receipt of Payment

Time of Supply of Goods

Return Period (Period in which VAT needs to be reported and Paid)

10th April, 2018

15th 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 will be the earliest of:

  • Date of transfer
  • 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 delivery of goods.

Scenario -3

Date of Invoice

Date of Delivery of Goods

Date of Receipt of Payment

Time of Supply of Goods

Return Period (Period in which VAT needs to be reported and Paid)

1st April, 2018

25th March,2018

10th April,2018

25th March,2018

Monthly

Quarterly

March '18

Jan-Mar'18

*Goods were delivered to the premises of the recipient.

In the above scenario, the fact that goods were delivered at the premises of the recipient implies that goods were transferred under the supervision of the supplier. Hence, the earliest of the date of actual transfer, date of invoice and receipt of payment will be the date of supply. In this case, date of transfer is earlier than others and time of supply will be 25th March, 2018.

Scenario -4

Date of Invoice

Date of Delivery of Goods

Date of Receipt of Payment

Time of Supply of Goods

Return Period (Period in which VAT needs to be reported and Paid)

1st April, 2018

25th March,2018

10th April,2018

25th March,2018

Monthly

Quarterly

March '18

Jan-Mar'18

*Goods were delivered to the recipient at the factory outlet of the supplier.

In the above scenario, the fact that goods were delivered to the customer at the factory outlet of the supplier implies that goods were not transferred under the supervision of supplier. In such a case, the date on which the recipient took possession the goods should be considered in arriving at the time of supply.

In this case, the earliest of the date on which the recipient took possession of the goods, date of invoice and receipt of payment will be the time of supply. As a result, time of supply will be 25th March, 2018.

Conclusion

It is important for every taxable supplier to understand the concept of time of supply and the manner of determining it. Firstly, the taxable supplier needs to search the facts of each of the supplies so as to determine which clause of the time of supply is applicable. Secondly, he needs to determine the date as appointed by this provision. Correct determination of time of supply helps you to report the VAT liability in the appropriate VAT return period and avoid cash flow constraint or penalties due to wrong determination.

Related Article:-

How to Determine the Time of Supply for Services