GST on Uncertain Revenue

[CAPurnima Bothra]

Case Study:

Lessor has raised demand note asking lease rental for the whole year.However lessee has moved to court and is not ready to pay any dues.Now in this scenario Lessor is paying GST out of his pocket as no amount is recoverable from the lessee which leading to huge cash blockage at this moment.

Can GST amount be escaped/defered on uncertain revenue and be paid once the revenue becomes certain.

[KASTURI SETHI]

You can decide according to the definition of 'Time of supply' as per details given below:-

13. Time of supply of services. - (1) The liability to pay tax on services shall arise at the time of supply, as determined in accordance with the provisions of this section.

(2) The time of supply of services shall be the earliest of the following dates, namely :-

(a) the date of issue of invoice by the supplier, if the invoice is issued within the period prescribed under sub-section (2) of section 31 or the date of receipt of payment, whichever is earlier; or

(b) the date of provision of service, if the invoice is not issued within the period prescribed under sub-section (2) of section 31 or the date of receipt of payment, whichever is earlier; or

(c) the date on which the recipient shows the receipt of services in his books of account, in a case where the provisions of clause (a) or clause (b) do not apply :

Provided that where the supplier of taxable service receives an amount up to one thousand rupees in excess of the amount indicated in the tax invoice, the time of supply to the extent of such excess amount shall, at the option of the said supplier, be the date of issue of invoice relating to such excess amount.

If you have issued invoice, liability arises in the following month. If no invoice is issued, then the time of supply is the date of receipt of payment.

[Alkesh Jani]

Sir/Madam,

Please consult your Advocate seeking the interim order from the court to get gst amount from the party, till the final order. Also check Section 92 is applicable or not.

Our experts may correct me if mistaken

Thanks

[DR.MARIAPPAN GOVINDARAJAN]

I endorse the views of Shri Sethi.

[Ganeshan Kalyani]

You have not received the payment so the completion of service is the point of taxation. GST is payable by you on completion of service. Assuming that you would have received payment on monthly basis then gst is payable on subsequent month.

[KASTURI SETHI]

Invoices must have been raised by the lessor. Without raising the invoice, is it possible to demand rent ? Date of invoice is crucial. Due date mentioned in the contract/agreement is crucial.

[Ganeshan Kalyani]

In case of lease the payment is made based on the agreement terms. Agreed in GST raising of invoice is must. So the liability would get triggered based on the invoice date. I agree with you Sir.

AI Summary

Time of supply of services determines GST liability: invoice date or receipt of payment triggers the tax obligation.
Time of supply rules determine GST on lease rentals: if an invoice is issued within the prescribed period, tax liability arises at the earlier of invoice date or receipt of payment; if no timely invoice, liability is the earlier of provision of service or receipt of payment; if neither applies, the recipient's book entry fixes time of supply. Thus, an issued invoice triggers liability in the following tax period, whereas absence of invoice ties liability to actual receipt. Invoice date and contract due date are material.