How to Determine Time of Supply for Services

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Tally Solutions, Feb-04-2020

For supply of services, the manner of determining the time of supply is similar to that for determining the time of supply for goods . The only change here is, instead of considering the 'Date of Transfer of Goods', you need to consider the 'Date of completion of Services' along with the occurrence of other dates related to supply of services as detailed in the table below:

Date of Supply for services

Time of Supply of Services

Earliest of the following

Date of Completion of Services

The date on which the services are completed.

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.

The above change is for an obvious reason that services are intangible in nature, unlike goods. However, on a larger perspective, the provisions are similar which helps to fill up the gap between the supply of goods and services, and ensures simpler principles for determining the time of supply for services.

Let us understand the Time of supply for services considering different business scenarios 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).

Scenario -1

Date of Invoice

Date of Completion of Services

Date of Receipt of Payment

Time of Supply for Services

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

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

In this case, the date of invoice is earlier than the date of completion of services 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 Receipt 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 Invoice

Date of Completion of services

Date of Receipt of Payment

Time of Supply for Services

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

5th April, 2018

25th March,2018

15th 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 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 completion of services is earlier than the date of invoice and date of receipt of payment.

Conclusion

The businesses engaged in supply of services need to take utmost care and caution in determining the time of supply considering various facts related to services supplied. Special attention is required in determining the date of completion of services. This is because, services are intangible in nature and the way of delivering services are different from each other. Thus, on a plain understanding, many steps or activities may appear to be the completion of services. Therefore, it is recommended for businesses to examine each case of service delivery or study the services contract to know the last step that defines the completion of services and accordingly determine the date of completion of services. Wrong determination of time of supply of services will have a bearing on the cash flow of the businesses, either due to early payment of VAT or imposition of penalties.

Related Article:-

1.How to Determine the Time of Supply for Goods

2.Time of Supply in case of continuous supplies or Progressive billing under VAT in UAE