In this article, we’re going to take a closer look at the change in GST rates
What things does the auditor need to check in audit if there is change in rate?
Effects of change in GST Tax Rate on Businesses
In the event of a change in the tax rate in GST, the time of supply must be determined in accordance with Section 14 of the CGST Act.
There can be two scenarios when the tax rates changes:
1) Goods/Services supplied before the change in the tax rate
2) Goods/Services supplied after the change in the tax rate
Proviso to Sec 14 – Time of supply in certain cases
Sec 14(a) Goods/Services supplied before the change in the tax rate
| Clause | Issue of Invoice | Receipt of payment | Time of supply |
|---|---|---|---|
| Section 14 (a)(i) | After the change in rate of tax | After the change in rate of tax | Date of receipt of payment or date of issue of the invoice whichever is earlier |
| Clause | Issue of Invoice | Receipt of payment | Time of supply |
|---|---|---|---|
| Section 14 (a)(ii) | Prior to change in rate of tax | After the change in rate of tax | Date of issue of Invoice |
| Clause | Issue of Invoice | Receipt of payment | Time of supply |
|---|---|---|---|
| Section 14 (a)(iii) | After the change in rate of tax | Prior to the change in rate of tax | Date of receipt of payment |
Sec 14(b) Goods/Services supplied after the change in the tax rate
| Clause | Issue of Invoice | Receipt of payment | Time of supply |
|---|---|---|---|
| Section 14 (b)(i) | Prior to the change in rate of tax | After the change in rate of tax | Date of receipt of payment |
| Clause | Issue of Invoice | Receipt of payment | Time of supply |
|---|---|---|---|
| Section 14 (a)(ii) | Prior to the change in rate of tax | Prior to the change in rate of tax | Date of receipt of payment or date of issue of the invoice whichever is earlier |
| Clause | Issue of Invoice | Receipt of payment | Time of supply |
|---|---|---|---|
| Section 14 (b)(iii) | After the change in rate of tax | Prior to the change in rate of tax | Date of issue of Invoice |
Note:
1) The supplier may have to issue a debit / credit note in order to take effect of new tariff rate.
2) The date of receipt of payment is deemed to be the day on which the payment is booked in the suppliers books of accounts or the date on which amount is credited in bank account, whichever is earlier.
Proviso to Sec 14
Provided that the date of receipt of payment shall be the date of credit in the bank account if such credit in the bank account is after four working days frmo the date of change in rate of tax.
Explanation: As per above proviso to Sec 14, if amount is received by cheque and realised in bank within 4 working days from the date of change in rate of tax, then date of receipt is the date of book entry or date of bank relaisation whichever is earlier.
For an example:
Date of completion of service: 01.06.2021
Date of issue of invoice: 05.06.2021
Payment recived by cheque and entered in books: 04.06.2021
Amount credit in bank account: 10.06.2021
Date of Change in tax rate: 06.06.2021
In the given the case time of supply is the date of entry in the books i.e. 04.06.2021
About The Author: CA Siddhi Shah
I am Chartered Accountant practicing in GST Law, Corporate Law and Income Tax Law.
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