Time of Supply Rules Effective 1 Jan 2011

Effective from 1 Jan 2011, the GST rules for time of supply has been changed to be in line with commercial practices and ease compliance for businesses.

For most transactions, a supply is treated as taking place (and output tax will be accounted for) at the earlier of when:

  1. An invoice is issued; or
  2. Payment is received.

General Time of Supply Rules Prior to 1 Jan 2011

Before 1 Jan 2011, a supply is treated as taking place at the earliest of when:

  1. The goods are removed or made available or the services are performed;
  2. A tax invoice is issued; or
  3. Payment is received.

Goods are treated as made available when:

  1. They are delivered to your customer;
  2. The title or ownership of the goods has been passed to your customer;
  3. Your customer has control or possession of the goods; or
  4. All rights pertaining to the goods have been transferred to your customer.

Services are treated as performed when the provision of the service has been completed.

timeofsupplyprior

The earliest of the 3 events is the delivery of goods/performance of service. Thus, the time of supply is 20 Mar 2009.

If the accounting period covered in your GST return is 1 Jan 2009 to 31 Mar 2009, you have to account for the supply in this GST return.

The 14-Day Rule

The 14-Day rule is an exception to the general time of supply rule.

If you issue a tax invoice within 14 days from the day that the goods are removed or made available, or when the services are performed, the time of supply will be the date of issuance of the tax invoice .

This is provided that payment has not been received from your customer.

14-Day Rule1 (png)

As tax invoice was issued within 14 days from the day of delivery of goods/performance of services and payment was not received at the time the tax invoice was issued, the time of supply is 3 Apr 2009.

If the accounting period covered in your GST return is 1 Apr 2009 to 30 Jun 2009, you have to account for the supply in this GST return.

Determining when an invoice is issued

Effective 1 Jan 2011, the date of issuance of any type of invoice will be an event that trigger the time of supply for GST purposes. This includes a tax invoice as well as any document (e.g. debit note) that serves as a bill, for payment for supplies made by a GST-registered supplier.

Prior to 1 Jan 2011, only the issuance of a tax invoice - and not any other type of invoice - was considered an event that would trigger the time of supply.

In general, documents such as sales order, pro-forma invoice, statement of accounts and letter/statement of claims are not considered as invoices for GST  purposes. This is because these documents are often not billing for payments and would therefore not be treated as invoices based on normal commercial practices.

For details, please refer to the e-Tax Guide GST: Time of Supply Rules (459KB).

Determining when Payment Is Received

The date when payment is received from your customers is one of the events that triggers the time of supply. Payments can be received through the various modes as follows:

  • Cash
    Payment is treated as received on the date which you receive the cash from your customer.
  • AXS & SAM Machines/NETS Facility/Credit Card etc.
    Payment is treated as received on the date which these establishments transfer the money to you.
  • Telegraphic Transfer
    Payment is treated as received on the date which your bank receives the money.
  • Cheques
    Payment is treated as received on the date which you present the cheque to the bank (i.e. the bank-in date). For a cheque that is dishonored, payment is treated as received on the date which you present the new cheque to the bank.

datepaymentisreceived (png)

The date when the cheque was banked-in (4 Jul 2011) will be treated as the date of payment received.

The supply will be treated as taking place on 4 Jul 2011 based on the new time of supply rules.

Supplying Service on a Continuous Basis

You are supplying a service on a continuous basis if the service:

  1. Stretches over a period of several months or years (e. g. maintenance services, construction services, rental); and
  2. You receive periodic payments.

The supply is treated as taking place at the earlier of when:

  1. Your customer pays you; or
  2. You issue a tax invoice (prior to 1 Jan 2011) or invoice (with effect from 1 Jan 2011)

Goods Sold on 'Approval' or 'Sale/Return' Terms

You may supply goods to your customers under an approval or sale/return terms. Under such terms, the sale does not take place until the customer approves the goods to confirm the sale.

Time of Supply Prior to 1 Jan 2011

Prior to 1 Jan 2011, the time of supply is the earliest of the following:

  1. When the sale is confirmed e.g. upon receipt of a letter of acceptance from your customer;
  2. 12 months after the removal of goods; or
  3. When the tax invoice is issued.

If the tax invoice is issued within 14 days of event (1) or (2), the date of the tax invoice will be the time of supply.

Time of Supply Effective 1 Jan 2011

Effective 1 Jan 2011, the time of supply will be treated as taking place at the earliest of the following:

  1. When any payment in respect of the supply is received;
  2. When invoice in respect of the supply is issued; or
  3. 12 months after the removal of goods.

The payment received must be to discharge an obligation to pay for the supply arising from the adoption of the sale.

Security Deposits

The mere receipt of payment will not be regarded as consideration received if it is held as security pending the adoption of the sale.

If such security deposit is collected upfront, payment is received only when the deposit is applied as all or part of the consideration for the supply, following the adoption of the sale.

Once there is a payment received or an invoice issued, GST has to be accounted for based on the full selling price of the goods.

Cooling Period

The above treatment for goods sold on "Approval" or "Sale/Return" terms must be distinguished from a sale where you provide a cooling period to your customer to return the goods.

For such sales, the general time of supply would still apply. If your customers returned the goods during the cooling period, you should issue a credit note to nullify the sale. Upon issuing the credit note, you can reduce the output tax previously accounted for in your GST return.

RATE THIS PAGE

  • Strongly Disagree
  • Strongly Agree

Information is easy to understand.

Information is useful.

Information is easy to find.

 
Please email us if you would like us to respond to your enquiries.