What is a Continuous supply of Goods?
Continuous supply of goods means supplying goods that are provided or agreed to be provided continuously or on a recurring basis. Under continuous supply of goods, the supplier invoices the customer on a regular or periodic basis as per the contract.
Example for Continuous Supply of Goods:
- Supplying bricks to builders is a continuous supply of goods as there will be a periodic supply of goods for a long time.
- Supply of gas through a pipeline with a weekly / monthly billing schedule
Time of Issuing the of invoice under continuous supply of goods: (Section 31(4) of the CGST Act, 2017)
In case of continuous supply of goods where successive/continuous transactions and successive/periodic payments are involved, the invoice shall be issued before or at the time each statement is issued / transaction occurs or when each payment is received.
What is Continuous supply of Services?
Continuous supply of services means a supply of services provided or agreed to be provided continuously or on a recurring basis. This can be carried out under a contract for a period exceeding three months with periodic payment obligations.
Example of Continuous Supply of Services:
- Internet services provided by Telecom companies
- Annual maintenance contracts
- Licensing of software or brand names
Issue of invoice under continuous supply of services: (Section 31(4) of the CGST Act, 2017)
- 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, the invoice shall be issued on or before the date of completion of that event.
The following aspects need to be noted for a continuous supply of Goods/Services
- It should be a contract for the supply of goods/services on a recurring basis and cannot be a one-time supply contract
- 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.
Frequently Asked Questions
Q When does the liability to pay GST arise in respect of the supply of goods?
Liability to pay GST arises on the date of issue of invoice or on the date on which the supplier receives the payment with respect to the supply.
Q What does ‘date of receipt of payment’ mean?
The date of receipt of payment is the date on which the payment is entered in the books of accounts of the supplier or the date on which the payment is credited to his bank account whichever is earlier.
Q What is the time period within which an invoice has to be issued in case of involvement in a continuous supply of goods?
In case of continuous supply of goods, where successive statements of accounts or successive payments are involved, the invoice shall be issued before or at each time such statement is issued or at the time each payment is received.
Q What is the time of supply?
The time of supply is the point when the liability to charge GST arises. GST Act provides separate times of supply for goods and services.
Q Relationship of a wholesaler and a retailer is to be considered as continuous supply of goods?
Yes, if an agreement exists between the wholesaler and retailer for periodic billing and periodic payments.
Q Can a supplier reduce his tax liability even if ITC is not reversed by the recipient?
Yes, the supplier can reduce his tax liability by issuing a commercial credit note even if the recipient did not reverse the input tax credit claimed by him.
Q Suppose, the invoice is not issued and the date of payment or date of completion of service are also not ascertainable, what will be the time of supply in this case?
The time of supply would be the date on which the recipient shows the recipient of services in his books of accounts.
Q Part advance payment is made or invoice is issued for part payment, whether the time of supply will cover the full supply?
No. The supply shall be deemed to have been made to the extent it is covered by the invoice or the part payment.
Q What is the last date for the issue of the invoice in case of supply of goods?
Usually, the invoice is to be issued before or after the completion of supply. If issued after the supply of goods or services, it has to be done within 30 days from such supply.