Continuous of Supply of goods and Services

“Continuous Supply” in context of GST laws in India and discuss about how GST shall be levied on goods & services which falls under the continuous supply. The term “Continuous Supply” has been defined by Section 2(32) & 2(33) of the CGST Act, 2017.

In case of continuous supply of goods, where successive statements of accounts or successive payments are involved, the invoice shall be issued before or at the time each such statement is issued or, as the case may be, each such payment is received.

As per Section 2(32) of CGST Act, ‘Continuous Supply of Goods’ means:

• A supply of goods which is provided or agreed to be provided, continuously or on recurrent basis.
• Under a contract
• Whether or not by means of a wire, cable, pipeline or other conduit.
• For which the supplier invoices the recipient on a regular or periodic basis.
• Includes supply of goods as notified by the Government.

‘Continuous Supply of Goods’ have five important elements:

(a) There should be a supply of goods on a continuous or recurrent basis. The word ‘recurrent’ means frequently or regularly. Thus, we can interpret that where there is an agreement to supply an agreed quantity of goods over a period of time in multiple consignments to a customer, it would be treated as continuous supply of goods.

(b) The supply should be under a contract. However, the contract need not be in writing.

(c) Supply of goods may be done by means of a wire, cable, pipeline or conduit. The words “Whether or not” in the definition shows that the above list is only illustrative. The supplier may deliver goods through other transport means to be treated as a continuous supply.

(d) The supplier invoices the customer on a regular or a periodic basis as agreed between them.

(e) The Government may notify or specify any goods supply of which shall be treated as continuous supply of goods.

Continuous Supply of Services Under GST:

“Continuous supply of services” means a supply of services which is provided, or agreed to be provided, continuously or on recurrent basis, under a contract, for a period exceeding three months with periodic payment obligations and includes a supply notified as being a continuous supply of services. In case of continuous supply of goods, the invoice has to be issued before or at the time of each of the successive statements is issued or each of the successive payments are received. Similarly, in case of a continuous supply of services the invoice has to be issued.

• Where the due date of payment is ascertainable from the contract, the invoice must be issued on or before the due date of payment;
• Where the due date of payment is not ascertainable from the contract, the invoice must be issued before or at the time when supplier of service receives payment;
• Where the payment is linked to the completion of an event, the invoice should be issued on or before the date of completion of that event.

Time of issuing of tax invoice for continuous supply of services

When the due date of payment can be identified from the contract

The invoice will be issued before or after the payment is to be made by the recipient but within specified time. Invoice will be issued, whether or not any payment has been received by the supplier. For example, telecom service provider sends telephone bill every month. This is mentioned in the contract with the telecom company.

When the due date of payment is cannot be identified from the contract

The invoice shall be issued before or after each time when the supplier of service receives the payment but within specified time.

When the payment is linked to the completion of an event

The invoice shall be issued before or after the time of completion of that event but within specified time.

When the supply of services ceases under a contract before the completion of the supply

The invoice shall be issued at the time when the supply ceases and such invoice shall be issued to the extent of the service provided before stopping. For example, a works contract starting on 1st August 2017 was due for completion in March 2018. But it was stopped on 11th Nov 2017. The contractor will issue an invoice on 11th November 2017 to the extent of work performed.

Specified Time

The invoice must be issued within 30 days from the date when each event, specified in the contract and requiring the recipient to make any payment, is completed.

If the supplier of service is a bank/financial institution/NBFC

The invoice must be issued within 45 days from the date of supply of service. The Centre or a State Government may notify the supply of goods or services to be treated as continuous supply of goods or services.