Time of Supply for AE & Import of Services (GST Guide)

When it comes to GST on services, most situations are straightforward: you either pay GST when you issue an invoice or when you receive the payment — whichever happens first. But things get trickier when the transaction is with an associated enterprise (AE), especially if the service provider or recipient is located outside India.

In cross-border transactions, money may not move immediately. Sometimes invoices are delayed. Sometimes the expense is booked late. And sometimes the service is consumed long before the payment is made.

To avoid indefinite delays or mistakes in tax liability, GST law has special rules for determining the Time of Supply (TOS) in these cases.

This blog breaks everything into simple language, with diagrams and practical examples so you can understand the logic smoothly.

What Are Associated Enterprises Under GST?

The term “associated enterprise” is borrowed from the Income Tax Act (Transfer Pricing).

Simply put, two enterprises are associated if:

• One controls the other,
• Or both are controlled by a common parent,
• Or one has significant shareholding or influence over the other.

Examples:

• Indian subsidiary receiving services from its US parent company
• Indian company using software services from its Singapore sister company
• An Indian holding company providing management services to its UK subsidiary

In all these cases, Section 13(3) of the CGST Act applies.

Legal Provision – Section 13(3) (Special Rule for Associated Enterprises)

The time of supply for services received from an associated enterprise located outside India is:

TOS = earlier of the following:

• Date of entry in the books of account of the recipient, or
• Date of payment

No need to wait for invoice, Even if the foreign company issues the invoice 6 months later, GST liability arises earlier.

This is the key difference between normal services and associated enterprise services.

Why This Special Rule Exists?

Because in related-party transactions:

• Invoices can be delayed purposely
• Payments may be adjusted internally
• There might be no “cash flow” even though service is received
• Companies may try to defer GST liability

So the government says:

👉 “We’ll tax you as soon as you either record the expense or pay the money.”

Simple Diagram – TOS for Associated Enterprises

Example 1 – Entry Posted First, Payment Later

Indian Co. receives consultancy from its US Parent.

• Service received: 10 Jan
• Entry in books: 20 Jan
• Payment made: 15 March

👉 Compare: 20 Jan vs 15 March Earliest date = 20 Jan

TOS = 20 January

GST is payable in January itself.

Example 2 – Payment Made Before Entry in Books

Indian Co. pays an advance to its Singapore associated enterprise.

• Payment made: 5 Feb
• Entry passed later: 8 Feb

👉 Compare: 5 Feb vs 8 Feb Earliest date = 5 Feb

TOS = 5 February

Advances trigger GST for associated enterprise transactions.

Example 3 – No Payment Made for Months

Service received from UK sister company.

• Entry made: 30 April
• Invoice issued: 15 July
• Payment made: Not yet paid

👉 TOS = 30 April GST must be paid in April return.

Invoice date is irrelevant.

Example 4 – Invoice Issued Late (6 Months Later)

Foreign parent issues invoice in December.

But the Indian subsidiary had:

• Recorded the expense in books on 4 August
• Payment not yet made

👉 TOS = 4 August

Even if invoice is in December, GST was due in August.

Import of Services – When Does GST Apply?

“Import of services” means:

• Supplier is located outside India
• Recipient is in India
• Place of supply is in India
• Service is for business or personal use

GST applies under Reverse Charge Mechanism (RCM).

BUT… if the foreign supplier is an associated enterprise → TOS follows Section 13(3).

If NOT an associated enterprise → Normal TOS rules apply:

TOS = earlier of

• Payment date, or
• 61st day from invoice date

This applies when:

• You hire a foreign freelancer
• You subscribe to Zoom, AWS, Google Workspace
• You take SaaS services

Difference Between Normal Import of Services & AE Imports

Example 5 – Normal Import of Service (Not an AE)

Indian company buys cloud services from AWS (not AE).

• Invoice: 1 July
• Payment: 20 September 60 days from invoice = 30 August → TOS = 30 Aug (whichever is earlier)

Example 6 – Import of Service From AE

Same example, but AWS is an associated enterprise.

• Entry in books: 15 July
• Payment: 20 September

👉 TOS = 15 July GST payable earlier.

Prepaid, Subscription & Retainer Scenarios

Case 1 – Prepaid SaaS subscription from AE

• Payment: 1 April
• Books entry: 3 April
• TOS = 1 April

Case 2 – Retainer fee from foreign parent

• Entry passed: 10 May
• No payment
• TOS = 10 May

Case 3 – Internal debit note instead of invoice

• Entry passed: 25 Feb
• TOS = 25 Feb

Special Case – Associated Enterprise Located in India?

Section 13(3) applies only when AE is located outside India.

If AE is in India →

👉 Normal GST rules apply. No special TOS treatment.

Why AE Rule Ignores Invoice Date?

Foreign group companies often:

• Issue consolidated invoices at year end
• Adjust costs through debit/credit notes
• Receive delayed approvals
• Issue intra-group charges only after audits

If GST waited for invoices, tax would be deferred indefinitely.

Hence, India’s GST law uses a more practical trigger:

👉 The moment the Indian company recognizes the expense → GST becomes due.

Reverse Charge Mechanism (RCM) Applies Automatically

Any import of services — AE or not — always attracts RCM.

Meaning:

• Foreign supplier does NOT charge GST
• Indian recipient pays IGST under RCM
• Indian company can claim full ITC (if used for business)

Simple Diagram – Import of Services (RCM)

For AE transactions, the only difference is when GST becomes payable.

Common Mistakes (Worth Avoiding)

• Booking expense late to defer GST = TOS will still be earlier if payment is earlier.
• Believing invoice date matters = For AE imports → invoice is irrelevant.
• Not paying GST on unpaid AE invoices = GST becomes due on expense entry itself.
• Delaying payment for years = Doesn’t stop TOS. Books entry is enough.
• Treating Netflix/Apple SaaS as AE = Only AE with relationship under Income Tax Act qualify.

Audit-Friendly Documentation You Should Maintain

For AE imports:

• Journal entry date
• Payment date
• Contract or intra-group agreement
• Transfer pricing certificate
• TOS working papers
• Accounting entry screenshots
• RCM challans (IGST paid)

This prevents disputes during GST audits or scrutiny.

Final Summary (Easy Version)

Conclusion

The Time of Supply for associated enterprises and import of services is designed to prevent tax leakage and ensure timely GST collection. By shifting the trigger to book entry or payment, GST law closes the gap left by delayed invoices, year-end adjustments, and slow overseas approvals.

If you’re dealing with cross-border group companies, outsourced services, or recurring international expenses, understanding Section 13(3) is crucial not just for compliance but also to avoid unwanted interest and scrutiny notices.

Once you keep track of:

• Expense recognition date
• Payment date

…you’ll never go wrong with GST time-of-supply for AE imports again.

Also Read: Time of Supply for Continuous Services & HAM Model