Section 14 of the Central Goods and Services Tax (CGST) Act, 2017 deals with the change in rate of tax in respect of supply of goods or services.
This section becomes important when the GST rate applicable to a particular supply changes and the date of supply, date of invoice and date of payment do not all fall on the same side of the rate change.
In such situations, simply applying the normal time-of-supply provisions under Section 12 or Section 13 may not be sufficient. Section 14 provides special rules for determining the time of supply when there is a change in the rate of GST.
The section specifically begins with a non-obstante clause, meaning its rules apply notwithstanding anything contained in Section 12 or Section 13.
What is Section 14 of the CGST Act?
Section 14 is titled “Change in rate of tax in respect of supply of goods or services.”
It provides special rules for determining the time of supply when there is a change in the rate of tax applicable to goods, services or both.
For example, suppose the GST rate on a particular product changes from 12% to 18% from a particular date.
A transaction may involve three different dates:
- Date on which the goods or services are supplied
- Date on which the invoice is issued
- Date on which payment is received
If these dates fall before and after the GST rate change, Section 14 helps determine which rate should apply by determining the applicable time of supply.
Why is Section 14 Important?
A change in GST rate can create confusion when a transaction crosses the effective date of the new rate.
For example:
- Supply takes place before the rate change.
- Invoice is issued after the rate change.
- Payment is received after the rate change.
In another transaction:
- Supply takes place after the rate change.
- Invoice was issued before the rate change.
- Payment was received before the rate change.
Section 14 provides specific rules for these situations.
Therefore, Section 14 is particularly relevant whenever there is a change in the GST rate around the time of a transaction.
Section 14 Overrides Section 12 and Section 13
Section 14 starts with the words “Notwithstanding anything contained in section 12 or section 13”.
This means that when Section 14 applies because there has been a change in the rate of tax, the special rules under Section 14 take precedence over the normal time-of-supply rules in Sections 12 and 13.
Section 12 deals with the time of supply of goods, while Section 13 deals with the time of supply of services.
Section 14 provides a special mechanism for both goods and services where the tax rate changes.
How Section 14 Works
Section 14 divides transactions into two broad situations:
1. Supply Takes Place Before the Change in Rate
This situation is covered under Section 14(a).
Here, the goods or services have been supplied before the change in the rate of tax.
Three different combinations of invoice and payment dates are then considered.
2. Supply Takes Place After the Change in Rate
This situation is covered under Section 14(b).
Here, the goods or services have been supplied after the change in the rate of tax.
Again, three combinations of invoice and payment dates are considered.
This creates a total of six situations under Section 14.
Section 14(a) – Supply Made Before Change in Rate of Tax
Section 14(a) applies when the goods or services have been supplied before the change in the rate of tax.
The applicable treatment depends on when the invoice was issued and when payment was received.
Section 14(a)(i) – Invoice and Payment Both After Rate Change
Under Section 14(a)(i), the supply takes place before the change in rate, but:
- Invoice is issued after the change in rate, and
- Payment is received after the change in rate.
In this situation, the time of supply is the earlier of:
- Date of receipt of payment, or
- Date of issue of invoice.
Example
Suppose the GST rate changes from 12% to 18% on 1 July.
The supply takes place on 25 June.
The invoice is issued on 5 July.
Payment is received on 10 July.
Here:
- Supply: 25 June
- Rate change: 1 July
- Invoice: 5 July
- Payment: 10 July
Both invoice and payment occur after the rate change.
Therefore, the earlier of the invoice date and payment date is 5 July.
The time of supply is therefore 5 July under Section 14(a)(i).
Section 14(a)(ii) – Invoice Before Change, Payment After Change
Under Section 14(a)(ii):
- Supply takes place before the rate change.
- Invoice is issued before the rate change.
- Payment is received after the rate change.
The time of supply is the date of issue of the invoice.
Example
Suppose:
- GST rate changes on 1 July.
- Supply takes place on 25 June.
- Invoice is issued on 28 June.
- Payment is received on 10 July.
The invoice was issued before the rate change, while payment was received after the rate change.
The time of supply is 28 June, the date of issue of the invoice.
Section 14(a)(iii) – Payment Before Change, Invoice After Change
Under Section 14(a)(iii):
- Supply takes place before the rate change.
- Payment is received before the rate change.
- Invoice is issued after the rate change.
The time of supply is the date of receipt of payment.
Example
Suppose:
- GST rate changes on 1 July.
- Supply takes place on 25 June.
- Payment is received on 28 June.
- Invoice is issued on 5 July.
Since payment was received before the rate change and the invoice was issued afterward, the time of supply is 28 June.
Section 14(b) – Supply Made After Change in Rate of Tax
Section 14(b) applies when the goods or services have been supplied after the change in the rate of tax.
Again, the treatment depends upon the timing of the invoice and payment.
Section 14(b)(i) – Payment After Change, Invoice Before Change
Under Section 14(b)(i):
- Supply takes place after the rate change.
- Invoice is issued before the rate change.
- Payment is received after the rate change.
The time of supply is the date of receipt of payment.
Example
Suppose the GST rate changes on 1 July.
The invoice is issued on 28 June.
The supply takes place on 5 July.
Payment is received on 10 July.
Since the payment was received after the rate change, the time of supply is 10 July.
Section 14(b)(ii) – Invoice and Payment Before Change
Under Section 14(b)(ii):
- Supply takes place after the rate change.
- Invoice is issued before the rate change.
- Payment is also received before the rate change.
The time of supply is the earlier of:
- Date of receipt of payment, or
- Date of issue of invoice.
Example
Suppose:
- Rate change: 1 July
- Invoice: 25 June
- Payment: 28 June
- Supply: 5 July
Both invoice and payment occurred before the rate change.
Therefore, the earlier date between the invoice date and payment date is considered as the time of supply.
In this example, the time of supply is 25 June.
Section 14(b)(iii) – Invoice After Change, Payment Before Change
Under Section 14(b)(iii):
- Supply takes place after the rate change.
- Invoice is issued after the rate change.
- Payment is received before the rate change.
The time of supply is the date of issue of the invoice.
Example
Suppose:
- Rate change: 1 July
- Payment: 28 June
- Supply: 5 July
- Invoice: 10 July
The payment was received before the rate change, but the invoice was issued after the rate change.
Therefore, the time of supply is 10 July, the date of issue of the invoice.
Section 14 – Complete Table
The six situations under Section 14 can be understood through the following table:
| Supply | Invoice | Payment | Time of Supply |
|---|---|---|---|
| Before rate change | After rate change | After rate change | Earlier of payment or invoice |
| Before rate change | Before rate change | After rate change | Date of invoice |
| Before rate change | After rate change | Before rate change | Date of payment |
| After rate change | Before rate change | After rate change | Date of payment |
| After rate change | Before rate change | Before rate change | Earlier of payment or invoice |
| After rate change | After rate change | Before rate change | Date of invoice |
This table provides a quick way to understand the basic structure of Section 14.
Date of Receipt of Payment Under Section 14
Section 14 also contains an important proviso regarding the date of receipt of payment.
For the purpose of the special rule, where the credit to the supplier’s bank account occurs after four working days from the date of change in the rate of tax, the date of receipt of payment is treated as the date of credit in the bank account.
This special proviso becomes relevant when determining the appropriate time of supply around the date of a rate change.
Example of the Four Working Days Rule
Suppose the GST rate changes on 1 July.
A payment is received through banking channels, but the amount is credited to the supplier’s bank account after four working days from the rate-change date.
In such a situation, the special proviso in Section 14 applies and the date of credit in the bank account is treated as the date of receipt of payment.
The actual application depends on the facts of the transaction and the applicable dates.
Explanation to Section 14 – Meaning of Date of Receipt of Payment
The Explanation to Section 14 defines the expression “date of receipt of payment.”
It means the earlier of:
- The date on which the payment is entered in the books of account of the supplier, or
- The date on which the payment is credited to the supplier’s bank account.
Therefore, businesses should maintain proper records of both accounting entries and bank credits when applying Section 14.
Section 14 Applies to Goods as Well as Services
An important feature of Section 14 is that it covers:
- Goods
- Services
- Goods and services together
Therefore, the provision is not limited only to the sale of goods.
For example, if the GST rate applicable to a particular service changes and the supply, invoice and payment occur around the effective date of the new rate, Section 14 may determine the applicable time of supply.
Section 14 and Section 12
Section 12 deals with the time of supply of goods.
Normally, Section 12 is used to determine when GST liability arises for goods.
However, when there is a change in the rate of tax, Section 14 provides special rules.
Therefore:
Section 12 → Normal time of supply of goods
Section 14 → Special time-of-supply rules when the tax rate changes
Section 14 expressly overrides Section 12 and Section 13 where its conditions apply.
Section 14 and Section 13
Section 13 deals with the time of supply of services.
The normal rules under Section 13 consider factors such as:
- Invoice
- Provision of service
- Receipt of payment
But where there is a change in the tax rate, Section 14 provides special rules.
Therefore, Section 14 should be considered before applying the normal time-of-supply rules in Sections 12 or 13 when a rate change is involved.
Why the Date of Supply Matters
The first major question under Section 14 is whether the goods or services were supplied:
- Before the rate change, or
- After the rate change.
This determines whether Section 14(a) or Section 14(b) needs to be applied.
Therefore, businesses should maintain clear documentation showing when the actual supply took place.
Depending on the nature of the transaction, relevant evidence may include:
- Delivery records
- Goods receipt records
- Service completion records
- Contracts
- Invoices
- Payment records
- Accounting entries
The exact evidence required will depend on the nature of the supply.
Why Invoice Date Is Important Under Section 14
The invoice date is one of the key factors in the six situations provided under Section 14.
Depending on the combination of dates, the time of supply may be:
- The invoice date
- The payment date
- The earlier of invoice and payment
Therefore, an incorrect invoice date or failure to issue the invoice within the applicable legal timeline can affect the determination of the time of supply.
Why Payment Date Is Important Under Section 14
Payment is another important factor.
Section 14 specifically defines the date of receipt of payment and provides a special rule concerning bank credit around the date of a rate change.
Therefore, businesses should retain:
- Payment receipts
- Bank statements
- Accounting entries
- Payment references
This information can be important when determining the applicable GST treatment.
Practical Example of Section 14
Suppose the GST rate on a particular service changes from 18% to 12% with effect from 1 July.
A service is supplied on 25 June.
The invoice is issued on 5 July.
Payment is received on 10 July.
Here:
- Supply = Before rate change
- Invoice = After rate change
- Payment = After rate change
This falls under Section 14(a)(i).
The time of supply is the earlier of the invoice date and payment date.
Therefore, the relevant time of supply is 5 July.
The applicable tax treatment must then be determined according to the rate applicable at the time of supply under the statutory framework.
Another Practical Example
Suppose the GST rate changes on 1 July.
A service is supplied on 5 July.
The invoice was issued on 25 June.
Payment is received on 10 July.
Here:
- Supply = After rate change
- Invoice = Before rate change
- Payment = After rate change
This falls under Section 14(b)(i).
The time of supply is the date of receipt of payment, which is 10 July.
Section 14 and Change in GST Rate – Important Precautions
Whenever the GST rate changes, businesses should not simply apply the new rate to all invoices issued after the effective date.
Similarly, they should not automatically apply the old rate to every transaction where payment was received before the change.
The correct treatment depends on:
- Date of supply
- Date of invoice
- Date of receipt of payment
- Whether the supply occurred before or after the rate change
- The specific rule under Section 14
- The effective date specified in the relevant rate notification
Therefore, the transaction should be examined as a complete set of dates.
Section 14 and Tax Rate Notifications
Section 14 provides the mechanism for determining the time of supply when there is a change in rate.
However, the actual change in GST rate is normally implemented through the relevant government notification.
Therefore, businesses should check both:
- The notification changing the GST rate, and
- Section 14 of the CGST Act.
The effective date mentioned in the relevant notification is particularly important.
Common Mistakes Under Section 14
Businesses can make mistakes when dealing with GST rate changes.
Some common issues include:
Ignoring the Actual Supply Date
The invoice date alone does not determine the treatment under Section 14.
Ignoring Payment Date
Payment timing can change the applicable time-of-supply rule.
Applying the New Rate to Every Post-Change Invoice
An invoice issued after the rate change does not automatically mean that the new rate applies without examining the other relevant dates.
Applying the Old Rate Solely Because Payment Was Received Earlier
Payment before the rate change is only one factor. The supply and invoice dates also need to be considered.
Not Checking the Rate Notification
The effective date of the rate change must be verified from the relevant notification.
Section 14 – Key Points
The important points of Section 14 can be summarized as follows:
- Section 14 deals with change in rate of tax for goods or services.
- It provides special rules for determining the time of supply.
- It applies notwithstanding Sections 12 and 13.
- It covers both goods and services.
- Section 14(a) applies where the supply takes place before the rate change.
- Section 14(b) applies where the supply takes place after the rate change.
- There are six combinations involving the date of supply, invoice and payment.
- Depending on the situation, the time of supply may be the invoice date, payment date or the earlier of the two.
- The section contains a special rule relating to bank credit occurring after four working days from the rate-change date.
- The date of receipt of payment is generally determined using the earlier of the supplier’s book-entry date and bank-credit date.
- The actual effective date of a GST rate change should be checked from the relevant government notification.
- Section 14 is particularly important when transactions cross the effective date of a GST rate change.
Conclusion
Section 14 of the CGST Act, 2017 provides special rules for determining the time of supply when there is a change in the rate of GST on goods, services or both.
The provision is important because a transaction can have three different relevant dates: the date of supply, the date of invoice and the date of payment. Depending on whether these dates occur before or after the GST rate change, Section 14 determines which date should be treated as the time of supply.
The section contains six specific situations covering supplies made before and after the rate change. It also provides rules for determining the date of receipt of payment, including a special provision relating to bank credit after four working days from the date of change in the tax rate.
For businesses, the safest approach when a GST rate changes is to verify the effective date in the relevant government notification and then examine the supply, invoice and payment dates together. Section 14 should be applied carefully because the correct time of supply can affect the GST rate applicable to the transaction.
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