GST Section 12 Explained: Time of Supply of Goods under CGST Act with Key Dates & Examples

Section 12 of the CGST Act, 2017 outlines the provisions for determining the time of supply of goods, which is crucial for establishing when GST liability arises. It specifies different rules for forward charge and reverse charge mechanisms, focusing on the earlier of invoice issuance or payment receipt. The section also includes provisions for additional charges like interest or penalties and offers fallback methods when standard rules don’t apply.

Recently amended by the Finance Act, 2025, this section ensures clarity in GST compliance. AUBSP simplifies these legal provisions with practical examples, key dates, and expert insights for better understanding and implementation.

Understanding GST Section 12: Time of Supply of Goods

Welcome to another insightful article by AUBSP, your trusted guide for Indian tax and accounting standards. In this article, we’ll walk you through Section 12 of the CGST Act, which defines the Time of Supply of Goods. Understanding this section is crucial for businesses and professionals to determine the point at which liability to pay GST arises.

Let’s break this down in a comprehensive, easy-to-understand manner with examples, explanations, and reference tables.

What is Time of Supply?

Under GST, the “Time of Supply” determines when the liability to pay tax arises for goods or services. Section 12 specifically covers goods, and once the time of supply is identified, the corresponding tax period and applicable GST rate are determined.

Key Provision: Section 12(1) of the CGST Act

“The liability to pay tax on goods shall arise at the time of supply, as determined in accordance with the provisions of this section.”

This means that GST becomes payable when the supply of goods takes place, as defined in the succeeding clauses of Section 12.

Detailed Provisions of Section 12 – Explained

Let us now examine each sub-section of Section 12 in detail, with clarity and examples.

Section 12(2): Time of Supply – Forward Charge

This sub-section applies when the supplier is responsible for paying GST (i.e., forward charge mechanism).

📌Time of supply is the earlier of:

1. Date of issue of invoice (or the last date on which it is required to be issued under Section 31), OR
2. Date of receipt of payment.

✔️ Special Provision:

If the supplier receives up to ₹1,000 in excess of the invoice amount, the supplier may choose the invoice date for such excess as the time of supply.

🔍 Explanation:

• “Supply” is considered to the extent covered by invoice/payment.
• “Date of payment” means the earlier of:
  • Entry in books of account, or
  • Credit to bank account.

Section 12(3): Time of Supply – Reverse Charge

When the recipient is liable to pay tax (reverse charge mechanism), the time of supply is the earliest of the following:

1. Date of receipt of goods;
2. Date of payment, as recorded in the books or bank account;
3. 30 days after invoice issuance date by the supplier.

✔️ If None Apply:

If it’s not possible to determine based on the above, use the date of entry in recipient’s books.

Section 12(4): Omitted by Finance Act, 2025

As per the latest amendment, sub-section (4) has been omitted and is no longer applicable.

Section 12(5): Default Time of Supply

When time of supply cannot be determined under Section 12(2), 12(3), or the now-omitted 12(4):

• If a periodical return is required, then it’s the due date of such return.
• In other cases, it is the date of payment of tax.

This ensures that there is always a fallback mechanism for determining the time of supply.

Section 12(6): Interest, Late Fee or Penalty

If the value of supply increases due to interest, late fee, or penalty for delayed payment, then the date of receipt of such additional amount is the time of supply for that portion.

AUBSP’s Insights & Practical Guidance

At AUBSP, we always strive to provide practical clarity. Here’s how you can apply Section 12 in real-life business transactions:

✅ Real-World Example: Forward Charge

A supplier issues an invoice on 5th April 2025 and receives payment on 3rd April 2025. Time of supply = 3rd April 2025 (earlier of invoice/payment).

✅ Real-World Example: Reverse Charge

Goods received on 10th May 2025; invoice dated 1st May 2025; payment made on 8th May 2025. Time of supply = 1st May + 30 days = 31st May, unless earlier date applies.

Why Section 12 Matters for Compliance

Understanding and applying Section 12 correctly ensures:

• Timely payment of GST
• Accurate return filing
• Avoidance of penalties and interest
• Proper tax planning

AUBSP strongly recommends that businesses maintain clear records of invoices, payment dates, and accounting entries to comply with these provisions seamlessly.

Conclusion

To summarize, Section 12 of the CGST Act plays a foundational role in determining GST liability on goods. Whether it’s a regular supply or one covered under reverse charge, this section outlines specific triggers for when tax becomes due.

At AUBSP, we are committed to making GST simpler and more transparent for every taxpayer. For more updates and expert guides, stay connected with us.

If you found this article helpful, don’t forget to explore more GST insights and updates right here on AUBSP.com – your go-to platform for taxation and business compliance in India.

FAQs on Time of Supply of Goods

What is Section 12 of the CGST Act?
Section 12 of the CGST Act, 2017 determines the time of supply for goods, which is crucial to identify when GST liability arises.

Why is the time of supply important under GST?
It helps determine the exact point when GST becomes payable and identifies the applicable tax rate and return period.

When does the liability to pay GST on goods arise?
The liability arises at the time of supply as per the provisions of Section 12 of the CGST Act.

What are the two key events that determine time of supply under forward charge?
The earlier of the date of invoice issuance or the date of receipt of payment.

How is the time of supply determined if payment is received before the invoice is issued?
In that case, the date of payment receipt becomes the time of supply.

What if the invoice is issued before the payment is received?
Then the invoice date is considered the time of supply, as it is the earlier of the two events.

How is time of supply determined in case of reverse charge?
It’s the earliest of the date of goods receipt, date of payment, or 30 days from the date of the supplier’s invoice.

What happens if none of the reverse charge dates can be determined?
The time of supply will be the date of entry in the recipient’s books of account.

Has there been any recent amendment to Section 12?
Yes, sub-section (4) has been omitted by the Finance Act, 2025.

What is the time of supply for interest, late fee, or penalty?
It is the date on which the supplier receives such additional amount.

What is the optional provision for small excess payments?
If the supplier receives up to ₹1,000 more than the invoice amount, they may treat the invoice date as the time of supply for that excess.

Which date is considered for payment – book entry or bank credit?
The earlier of the two – the date entered in the books or credited in the bank account.

What is the fallback option if time of supply can’t be determined under Sections 12(2), (3), or (4)?
It is the due date of the periodical return or the actual date of tax payment.

Does Section 12 apply to both goods and services?
No, Section 12 applies only to goods. Section 13 deals with time of supply for services.

Is there a notification related to the enforcement of Section 12?
Yes, Notification No. 9/2017-Central Tax, dated 28.06.2017, enforced it from 01.07.2017.

Can a supplier choose the time of supply under forward charge?
No, they must follow the rule of the earlier of invoice date or payment date, except in the ₹1,000 excess payment case.

What is the relevance of Section 31 in determining time of supply?
Section 31 prescribes when an invoice must be issued, which affects the determination under Section 12.

What is the impact of incorrect time of supply determination?
It may lead to interest, penalties, or non-compliance in GST filings.

Who should ensure compliance with Section 12?
Both suppliers and recipients of goods must ensure correct application based on the transaction type.

How can businesses practically apply Section 12 provisions?
By maintaining accurate records of invoice dates, payment dates, and timely entries in accounting books.

Does AUBSP provide updates and explanations on GST provisions?
Yes, AUBSP offers detailed, expert explanations, examples, and updates to help businesses comply with GST laws effectively.