What is the Continuous Supply of Goods and Services under GST?
Continuous supply of goods and services refers to a supply of goods or services provided continuously or regularly over a specific period. It may involve a long-term contract or an agreement to supply goods or services regularly.
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The GST law recognises continuous supply as a distinct supply category with specific provisions. The time of supply, rate of tax, and other aspects of constant supply are determined based on the contract terms or agreement between the supplier and the recipient. Businesses need to understand the provisions related to continuous supply to ensure compliance with GST regulations.
What is the continuous supply of goods?
Continuous supply of goods can refer to any of the following scenarios:
- A supply of goods which has been provided or which will be provided; OR
- A supply of goods made on a continuous or recurring basis; OR
- A supply of goods made under the terms of a contract; OR
- The supplier periodically sends an invoice to the recipient OR
- A supply of goods employing a wire, cable, or similar conduit, e.g., cooking gas pipeline, electricity, water supply, etc.
When to Issue an Invoice for Continuous Supply of Goods
In the continuous supply of goods, a supplier is not liable to raise an invoice with every consignment. It is raised periodically. For example, if a certain number of bricks is agreed upon, a supplier will only raise an invoice at the agreed period, such as monthly, quarterly or annually. Account statements/payments are issued one after the other, and invoices are raised before or simultaneously with each statement or payment.
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What is the continuous supply of services?
The continuous supply of services refers to the unceasing supply of services that have been agreed upon over a period exceeding three months, per the terms of a contract signed by both parties. Compensation is also provided periodically. Some examples of continuous supply of services include annual maintenance contracts, internet service providers, etc.
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When to Issue an Invoice for Continuous Supply of Services
- If the due date of payment is identified, the invoice will be raised before payment is due.
- If the payment due date is not identified, the invoice will be raised when the supplier receives the payment.
- If the payment depends on the completion of a specific task, then the invoice will be raised after the task is completed.
- If services cease before the end date of a contract, an invoice will be raised on the day the services stop. For example, if a contract ends in September, it is to be finished in December.
Note—if the supplier is a bank or a financial institution, an invoice will be raised 45 days from the date of service supply.
Conclusion
Continuous supply of goods and services under GST is a distinct category of supply that involves regular or ongoing supply of goods or services over a specific period. The GST law has specific provisions related to continuous supply, which determine the time of supply, rate of tax, and other aspects based on the contract terms or agreement between the supplier and recipient. To ensure proper accounting and tax payment, businesses must understand and comply with these provisions. Adequate documentation and record-keeping are crucial for continuous supply, and any errors or omissions could lead to penalties or interest charges.
Frequently Asked Questions
- What do you mean by the supply of goods under GST?The supply of goods under GST refers to the transfer of ownership of goods from one person to another for consideration. This includes sale, transfer, barter, exchange, license, rental, lease, or disposal made during business.
- How is the supply of services under GST defined?The supply of services under GST includes any activity other than the supply of goods. This encompasses a wide range of activities such as consultancy, maintenance, transportation, and professional services provided for consideration.
- What is the continuous supply of services under GST?Under GST, continuous supply of services refers to the provision of services on a recurring or periodic basis, where the contract includes an obligation for payment. Examples include leasing, maintenance contracts, and telecom services.
- Can you explain the continuous supply of goods under GST?The continuous supply of goods under GST involves the supply of goods on a constant or recurrent basis under a contract, where the supplier invoices the recipient regularly and makes periodic payments.
- How is the time of supply determined for the supply of goods and services under GST?The time of supply for goods under GST is usually the date of issue of the invoice or the date of receipt of payment, whichever is earlier. For services, it is the date of provision of services, the date of invoice, or the date of receipt of payment, whichever is earlier.
- What are the key differences between the supply of goods and services under GST?The key differences between the supply of goods and services under GST lie in the transaction. Goods are tangible and involve a transfer of ownership, whereas services are intangible and involve an agreement to do or refrain from doing something.
- How does GST handle the continuous supply of services?For continuous service supply under GST, the tax liability is triggered at the time of issuance of the invoice or when payment is due, as per the contract, whichever is earlier. This ensures that tax is collected periodically.
- What do you mean by the continuous supply of goods under GST?Under GST, continuous supply means repeatedly supplying goods over a period under a contract, with periodic payments and invoices. This arrangement is typical in industries like utilities, where goods are delivered continuously and payments are made regularly.
- What are examples of goods and services supplied under GST?Examples of the supply of goods under GST include selling products, leasing machinery, or transferring ownership of items. Examples of the services supplied under GST include consultancy, transportation, and maintenance services.
- What are the tax implications for a continuous supply of goods and services under GST?The tax implications for a continuous supply of goods and services under GST require periodic invoicing and payment. GST must be paid at the time stipulated by the contract, ensuring that tax collection aligns with the delivery and payment schedules.
