What is the continuous supply of service, and specific provisions such as time of supply, issuance of invoice payment of tax liability for the same under GST Law?
“Continuous supply of services” means a supply of services which is provided, or agreed to be provided, continuously or on a recurrent basis, under a contract, for a period exceeding 3 months with periodic payment obligations and includes the supply of such services as the Government may, subject to such conditions, as it may, by notification, specify; [section 2(33)]
Example of Continuous Supply of Services:
Internet services provided by Telecom companies
Annual maintenance contracts
Licensing of software or brand names
Essential elements for Continuous supply of service: The following aspects need to be noted for a continuous supply of Goods/Services
- There should be a contract for the supply of goods/services on a recurring basis and cannot be a one-time supply contract. for contract refer to the Indian Contract Act 1872.
- The period of contract of supply should be more than 3 months i.e. Goods or services are to be supplied on a recurring basis for at least 3 months continuously.
- The contract should mention the case of periodic billing and periodic payments (weekly / monthly / every Monday, etc) and not one-time. The frequency of billing and payment should be clearly mentioned in the contract.
Time limit for Issuance of invoice under continuous supply of services: [Section 31(4) ]
- Where the due date of payment is ascertainable from the contract, the invoice shall be issued on or before the due date of payment.
- When the due date of payment is not ascertainable from the contract, the invoice shall be issued before or at the time when the supplier is receiving the payment.
- When the payment is linked to the completion of the event ( Milestone), the invoice shall be issued on or before the date of completion of that event.
Liability to pay tax: The liability to pay tax on services shall arise at the time of supply, as determined in accordance with the provisions of section 13.
- Time of supply under section 13 of the CGST/SGST: The time of supply of services shall be the earliest of the following dates, namely:—
(a) the date of issue of invoice by the supplier, if the invoice is issued within the period prescribed under section 31 or the date of receipt of payment, whichever is earlier; or
(b) the date of provision of service, if the invoice is not issued within the period prescribed under section 31 or the date of receipt of payment, whichever is earlier; or
(c) the date on which the recipient shows the receipt of services in his books of account, in a case where the provisions of clause (a) or clause (b) do not apply:
Provided that where the supplier of taxable service receives an amount upto Rs.1000/- in excess of the amount indicated in the tax invoice, the time of supply to the extent of such excess amount shall, at the option of the said supplier, be the date of issue of invoice relating to such excess amount.
Explanation.—For the purposes of clauses (a) and (b)—
(i) The supply shall be deemed to have been made to the extent it is covered by the invoice or, as the case may be, the payment;
(ii) “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.
