A major change to the GST time of supply rules

An amendment has been brought to the GST Regulation, changing the time of supply rules of advance payments, non-refundable deposits and retention payments of construction services.

As per the previous rules, an advance payment meant that the taxpayer must account for GST on the full value of supply. However, with the new rules, GST must be paid on advance payments only with respect to the amount of the advance payment, provided that a tax invoice is not issued. This is a significant change in the GST rules and is likely to benefit several taxpayers, especially those in the tourism sector and those working on contract basis where advance payments are common.

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Similarly, the amendment requires taxpayers to account for GST on non-refundable deposit if a portion of that can be attributable as part of the price, and requires GST only on that portion of the non-refundable deposit – not from the full value of the supply.

While the GST Regulation prior to the amendment did not have specific rules on retention payments for construction service, the Regulation now makes it clear that GST must be paid on the retention amount on the earlier of receipt of payment or raising of invoice. In this instance too, if only a part of the amount is received, GST must be paid only on the amount received.

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