How is Time of Supply Fixed when there is Change in the Tax Rate during the Continuous Supply of a Goods or Service?

It is possible that the tax rates may change during the period when a supply is continuously being done. In such cases, it is important to correctly determine the time of supply to determine which tax rate is applicable. A change in tax rate may result in huge losses or profits for the concerned party.

There are only two scenarios to consider , ie , whether the goods or services or both have been supplied BEFORE or AFTER the change in rate of tax,. Accordingly, the following conditions are considered:

CASE 1 :GOODS OR SERVICES HAVE BEEN SUPPLIED BEFORE THE CHANGE IN RATE OF TAX

	INVOICE ISSUED BEFORE CHANGE IN TAX RATE	INVOICE ISSUED AFTER CHANGE IN TAX RATE
PAYMENT RECEIVED BEFORE CHANGE IN TAX RATE	--------------------------------------	The time of supply shall be the date of receipt of payment;
PAYMENT RECEIVED AFTER CHANGE IN TAX RATE	Time of supply shall be the date of issue of invoice	Time of supply shall be the date of Receipt of payment or the date of issue of invoice, whichever is earlier

CASE 2 :GOODS OR SERVICES HAVE BEEN SUPPLIED AFTER THE CHANGE IN RATE OF TAX

	INVOICE ISSUED BEFORE CHANGE IN TAX RATE	INVOICE ISSUED AFTER CHANGE IN TAX RATE
PAYMENT RECEIVED BEFORE CHANGE IN TAX RATE	Time of supply shall be the date of receipt of payment or date of issue of invoice, whichever is earlier	Time of supply shall be the date of issue of invoice
PAYMENT RECEIVED AFTER CHANGE IN TAX RATE	Time of supply shall be the date of receipt of payment	--------------------------------------

In the above cases, “The Date of Receipt of Payment” shall be the date on which the payment is entered in the books of account of the supplier or the date on which the payment is  credited to his bank account (if such credit in the bank account is after four working days from the date of change in the rate of tax) , whichever is earlier.

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