It has been observed that many stakeholders especially work contract service suppliers are in confusion as to the correct application of the tax rate on ongoing works contract services due to the recent change in the rate of tax from 12% to 18% w.e.f. 18.07.2022.
Therefore, the matter was examined and it has been clarified that where there is a change in the rate of tax in respect of goods or services or both, the time of supply as outlined in section 14 of the NGST Act, 2017 shall determine the correct rate of tax. Section 14 of the NGST Act, 2017 is briefly illustrated for general guidance and reference by all concerned;
|
Where Goods or Services or both are Supplied |
Date of issue of Invoice |
Date of receipt of Payment |
Time of Supply |
Applicable GST |
|
Before the change in rate of tax- |
after the change in rate of tax |
after the change in rate of tax |
date of receipt of payment or the date of issue of invoice, whichever is earlier |
|
|
20.08.2022 |
25.08.2022 |
20.08.2022 |
18% |
|
|
prior to the change in rate of tax |
after the change in rate of tax |
date of issue of invoice |
|
|
|
16.08.2022 |
25.08.2022 |
16.08.2022 |
12% |
|
|
after the change in rate of tax |
before the change in rate of tax |
date of receipt of payment |
|
|
|
20.08.2022 |
16.08.2022 |
16.08.2022 |
12% |
|
|
After the change in rate of tax- |
prior to the change in rate of tax |
after the change in rate of tax |
date of receipt of payment |
|
|
16.07.2022 |
25.08.2022 |
25.08.2022 |
18% |
|
|
before the change in rate of tax |
before the change in rate of tax |
date of receipt of payment or date of issue of invoice, whichever is earlier |
|
|
|
16.08.2022 |
17.08.2022 |
16.08.2022 |
12% |
|
|
after the change in rate of tax |
before the change in rate of tax |
date of issue of invoice: |
|
|
|
20.08.2022 |
16.08.2022 |
20.08.2022 |
18% |
Note: "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, whichever is earlier.
Therefore, it has been clarified that when there is a change in the rate of tax, the correct application of the tax rate shall be determined on the basis of time of supply as prescribed under section 14 of the NGST Act, 2017.
(DIPR)