1. Introduction
In this article we shall discuss about the meaning of continuous supply of goods / services and how their time of supply is determined with help of illustrations.
Time of supply is one of most important provision of GST Law as it determines when liability to pay GST arises. Further time of supply is also relevant for determining the rate of tax and rate of exchange applicable in case of international transactions.
Any delay in determination of time of supply, would result in delay in payment of tax which shall be subject to interest @ 18% p.a. which could affect the cash flows of the business adversely.
2. Meaning of Continuous supply of goods
As per Section 2(32) of the CGST Act,2017, continuous supply of goods means:
- Supply of goods which is provided or agreed to be provided , continuously or on recurrent basis, under a contract, whether or not by means of a wire, cable, pipeline or other conduit, AND
- for which supplier invoices the recipient on a regular or periodic basis AND
- includes supply of such goods as the Government may, subject to such conditions, as it may, by notification ,specify.
As per the definition, supply should be made on continuous or recurrent basis i.e. throughout the period, under a contract in order to be eligible to be regarded as continuous supply.
If the supply is not continuous or recurrent, it would be a normal one to one supply and not a continuous supply of goods. Also in cases of continuous supply, the supplier normally raises invoice on periodic basis as per the terms of the contract as it would neither be feasible nor practical to raise invoices daily as it would translate into 30 or more invoices in a month, considering supply being made on daily basis.
It is further submitted that the Government has powers to declare certain supply of goods as continuous supply of goods. However till date no goods have been notified as continuous supply by the Government.
Examples:
- Contract of cement supplier with builder wherein such supplier shall on daily / weekly basis, supply cement bags based on requirement of the builder and issues invoice at month end, as per terms of the contract.
- Contract of water can supplier with a Company wherein such supplier shall on daily basis, supply water can to the office and issue invoice at month end, as per terms of the contract.
3. Meaning of Continuous supply of services:
As per Section 2(31) of the CGST Act,2017 “continuous supply of services” means:
- a supply of services which is provided, or agreed to be provided, continuously or on recurrent basis, under a contract,
- for a period exceeding three months with periodic payment obligations and
- includes supply of such services as the Government may, subject to such conditions, as it may, by notification, specify.
The basic feature of continuous supply as was existent in the definition of continuous supply of goods viz supply is on continuous and recurrent basis is present here also, however with a rider that period of contract should be for a period exceeding three months. Such minimum time limit of contract was not a prerequisite for continuous supply of goods.
Further under continuous supply of goods, there is thrust on invoicing by supplier on regular or periodic basis whereas the language used here is periodic payment obligations, which in substance appears to be the same.
Further in case of services also, the Government also has powers to declare certain supply of services as continuous supply of services. However till date no services have been notified as continuous supply of services by the Government.
The prominent examples of continuous supply of services are work contract services, construction services and telecommunication services.
4. Time of supply of continuous supply of goods
The time of supply of goods as per Section 12(2)(a) of the CGST Act,2017, is the date of issue of invoice by the supplier or the last date on which he is required, under section 31 , to issue the invoice with respect to the supply.
It is worth noting that advances in respect of goods are not subject to GST for all tax payers (other than composition suppliers) as per Notification No. 66/2017-CT dtd 15-11-2017 and thus only the date of invoice or due date of issuance of invoice are relevant for determining the time of supply of goods.
Due date of issue of invoice of continuous supply of goods
As per Sec 31(4) of the CGST Act, 2017, in case of continuous supply of goods, where successive statement of accounts or successive payments are involved, the invoice is required to be issued before or at the time:
- each such statement is issued or,
- as the case may be each such payment is received.
Thus the due date of issue of invoice boils down to the contract entered in regard to the continuous supply of goods. In case the contract provides that a statement on account shall be prepared by the supplier on monthly / quarterly basis, the invoice is required to be issued along with issuance of such a statement of account.
There may be situations specially supply contracts with Government Deptt. , wherein the supply made by supplier is measured and approved by the Govt. on periodic basis and accordingly payment is released by the Govt. In such cases invoice is required to be issued on or before the receipt of such payment by the supplier.
Illustration 1:
Find time of supply of continuous supply of goods where the contract prescribes for issuance of periodic statement of account.
| Date of issue of Statement of Account | 31-03-20XX |
| Date of Invoice | 05-04-20XX |
| Date of advance payment received | 20-03-20XX |
As per Section 12(2)(a), the time of supply of goods is the date of invoice or due date of invoice whichever is earlier. In this case the due date of issue of invoice as per Section 31(4) is 31-03-20XX i.e. date of issue of statement of account, whereas the actual date of issue of invoice is 05-04-20XX. Thus earliest of these two dates shall be taken as the time of supply which is 31-03-20XX. Advance payments are not to be considered for computing time of supply of goods.
Illustration 2:
Find time of supply of continuous supply of goods in case contract prescribes for successive payments.
| Date of receipt of payment | 05-04-20XX |
| Date of Invoice | 31-03-20XX |
As per Section 12(2)(a), the time of supply of goods is the date of invoice or due date of invoice whichever is earlier. In this case the due date of issue of invoice as per Section 31(4) is 05-04-20XX i.e. date of receipt of payment, whereas the actual date of issue of invoice is 31-03-20XX. Thus earliest of these two dates shall be taken as the time of supply which is 31-03-20XX.
5. Time of supply of continuous supply of services
The time of supply of goods as per Section 13(2)(a) & (b) is the date of issue of invoice ( date of provision of service , if invoice not issued within prescribed time) or the date of receipt of payment whichever is earlier.
It may be noted here that dispensation regarding payment of GST on advances received as in case of goods is not available for services and time of supply is triggered upon receipt of advance even if supply has not been accomplished.
Prescribed time for issue of invoice for continuous supply of services
The prescribed time for issue of invoices for continuous supply of services as mandated under Section 31(5) of the CGST Act,2017, is as under:
a) where the due date of payment is ascertainable from the contract, the invoice shall be issued on or before the due date of payment;
b) where the due date of payment is not ascertainable from the contract, the invoice shall be issued before or at the time when the supplier of service receives the payment;
c) where the payment is linked to the completion of an event, the invoice shall be issued on or before the date of completion of that event.
It may be noted here that the 30 days / 45 days period for issuance of invoice as laid down in Rule 47 of the CGST Rules, 2017 is applicable for normal supplies and is not applicable in case of continuous supply of services.
Thus the time within which invoice is to be raised boils down to the contract executed between supplier and recipient for continuous supply of services.
| Situation | Description | Invoice to be issued on or before |
| Payment not linked to completion of an event | Due date of payment is ascertainable from the contract | Due date of payment |
| Payment not linked to completion of an event | Due date of payment not ascertainable from the contract | Actual receipt of payment. |
| Payment linked to completion of an event. | – | Date of completion of the event. |
The above prescribed time for issuance of invoice is more comprehensive than prescribed for continuous supply of goods wherein the invoice was to be issued one or before issue of statement of account or receipt of payment, as the case may be.
Illustration 3:
Find time of supply of continuous supply of services where due date of payments are ascertainable from the contract.
| Due date of payment as per contract | 01-04-20XX |
| Date of Invoice | 05-04-20XX |
| Date of receipt of payment | 07-04-20XX |
| Date of supply | 31-03-20XX |
In the instant case the time within which the invoice is to be issued is 01-04-20XX i.e. due date as per contract. However as invoice was not issued by said date, the date of supply i.e. 31-03-20XX or the date of receipt of payment i.e. 07-04-20XX, whichever is earlier is the time of supply, which in this case is 31-03-20XX.
Illustration 4:
Find time of supply of continuous supply of services where due date of payment is not ascertainable from the contract.
| Date of Invoice | 05-04-20XX |
| Date of receipt of payment | 07-04-20XX |
| Date of supply | 31-03-20XX |
In this case as per Section 31(5), the date of receipt of payment i.e. 07-04-20XX would be the time within which invoice is to be issued. However as the invoice is issued on 05-04-20XX, before the prescribed time, the same would be regarded as time of supply. Thus time of supply would be 05-04-20XX.
Illustration 5:
Mr A booked an under construction flat with builder X Ltd. As per contract 20% of payment will be due on completion of first floor of building. Find time of supply:
| Date of completion of first floor | 01-05-20XX |
| Date of Invoice | 05-05-20XX |
| Date of receipt of payment | 07-05-20XX |
The above is a case of construction services which is a continuous supply of service. Further here the payment is linked to completion of an event i.e. completion of first floor, accordingly as per Section 31(5) of the CGST Act, the invoice would be required to be issued by 01-05-20XX. However as there is delay in issuance of invoice, the time of supply shall be date of supply i.e. 01-05-20XX or date of receipt of payment i.e. 07-05-20XX, which-ever is earlier i.e. 01-05-20XX.
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Frah Saeed is a law graduate specializing in the core field of indirect taxes and is the Co-founder of taxwallah.com. She has authored many publications on GST and is into full-time consultancy on GST to big corporates. She as a part of taxwallah.com heads a team comprising of Chartered Accountants and Advocates and plays a key role in our mission to disseminate GST knowledge to all.
