goods and service tax

Copy Page

Published on 3 May 2025

Understanding GST Liability and Time of Supply Regulations

Ever wondered why your accountant keeps asking for invoices and payment details before every GST filing? Or why sometimes a payment seems to trigger a tax liability even before you’ve sent out the goods? If you run a business in India, understanding how and when GST liability kicks in can save you from headaches (and penalties) down the road. Let’s break down the latest rules, explain the “time of supply” in plain language, and share a few practical tips to keep your business on the right side of the law.

When Do You Owe GST? The Basics

GST liability is like a timer—it starts ticking when you supply goods or services. The trick is knowing exactly when that timer starts. For most businesses, this is called the “time of supply,” and it’s the moment you officially owe GST to the government. Get this wrong, and you might end up paying interest or penalties.

Time of Supply for Goods: What Triggers the Clock?

Let’s say you sell some products. When does your GST liability begin? The law says it’s the earliest of these three moments:

  • The day you issue the invoice

  • The last day you’re allowed to issue the invoice (usually when you ship the goods)

  • The day you get paid (even if it’s just an advance) If you’re a composite dealer (those with a lower turnover and simpler compliance), the clock starts ticking at the earliest of invoice issuance or payment receipt.

  • Example: You sell goods on February 10, issue the invoice on February 12, and get paid on February 20. The time of supply? February 12—unless the invoice should’ve been issued earlier, or you got an advance before that.

What If You’re Late with the Invoice?

If you miss the invoice deadline, the time of supply becomes the earliest of:

  • The date you finally issue the invoice
  • The date you get paid So, even if you’re late, the taxman still wants his cut based on whichever happens first.

Time of Supply for Services: Slightly Different Rules

For services, the rules are similar but tweaked for how services work. The time of supply is the earliest of:

  • The date you issue the invoice
  • The date you complete the service (if you’re late with the invoice)
  • The date you get paid If you’re really late and haven’t issued an invoice, the time of supply is the date you finish the service or the date the client records it in their books—whichever comes first.

Reverse Charge: When You Pay GST for Someone Else

Sometimes, you’re on the hook for GST even if you’re the buyer. This is called the reverse charge mechanism. Here’s how it works:

  • For goods: The time of supply is the earliest of when you receive the goods, when you pay for them, or 30 days after you get the invoice (if you’re the one liable to pay GST).
  • For services: It’s the earliest of when you pay, or 60 days after you get the invoice (used to be 61 days, but it’s now 60 as per the latest rules). If it’s still unclear, the date you record the transaction in your books is what counts.

Vouchers: New Rules for 2025

If you deal with vouchers (like gift cards), here’s what’s changed:

  • Goods: If you know what the voucher is for when you issue it, GST is due at issuance. If not, it’s due when the voucher is redeemed.
  • Services: GST is now only due when the voucher is redeemed, not when it’s issued. This change makes life simpler for businesses that sell vouchers for future services.
Share: