What is the Continuous Supply of Goods and Services under GST?

The government intends to improve the process of taxation. Thus, various amendments and rules are introduced. One such implementation includes the CGST Act of 2017, under Section 2 (33), ‘continuous supply’ refers to an act of providing recurrent services and goods over a long period, namely more than three months. The payment or compensation for the same is also provided on a recurrent basis. 

What is the continuous supply of goods?

The continuous supply of goods refers to the unceasing supply of goods agreed upon over a certain period per the contract terms signed by both parties. The compensation is also provided periodically. It can be provided through the help of conduits such as wires, pipelines, etc.  Some examples of a continuous supply of goods include a regular supply of gas or bricks monthly to a contractor.

Time of issuing invoice for continuous supply of goods 

In the case of regular supply or deliverables, 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. Or  Account statements/payments are issued one after the other, and invoices are raised before or at the same time as each statement or payment.

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 time which exceeds three months, per the terms of a contract signed by both parties. The compensation is also provided periodically.  Some examples of continuous supply of services include annual maintenance contracts, internet services providers etc. 

Time of issuing invoices for continuous services

The invoice is to be raised before or after a payment is made within the specified time agreed on by both parties. 

• If the due date of payment is identified, the invoice will be raised before payment is due. 

• If the due date of payment is not identified, the invoice will be raised when the supplier has received the payment. 

• If the payment depends on the completion of a specific task, then the invoice will be raised after the said task is completed. 

• In case of cessation of services before the end date of a contract, an invoice would be raised on the day the services stop, for example, the end of a contract in September, which was to be finished in December. 

Note- if the supplier is a bank or a financial institution, an invoice would be raised 45 days from the date of service supply. 

Conclusion 

As stated earlier, the administration wants to make the taxation process as simple and efficient as possible. Thus, this provision helps in some complex processes, which allow you to file for your taxes on the earliest date.