Time of Supply of Goods under GST – Forward Charge Explained

When it comes to GST compliance, one of the biggest questions for every business is — “When exactly does GST become payable on a supply?”

It’s not always when you get paid, and it’s not necessarily when you ship goods. The law lays down a specific set of rules to figure this out, called the Time of Supply. And when you’re dealing with goods under forward charge, understanding these rules can make or break your filing accuracy.

Let’s walk through this concept in simple language — step by step — and also look at practical examples to clear every possible confusion.

What Does ‘Forward Charge’ Mean?

Under the forward charge mechanism, the supplier of goods is responsible for paying GST to the government. This is the standard scenario — where you, as the seller, collect GST from your customer and pay it to the government while filing your return.

This is different from reverse charge, where the recipient (buyer) pays the tax instead of the supplier.

So, in this blog, we’re focusing only on time of supply for goods under forward charge, as covered in Section 12(2) of the CGST Act, 2017.

Legal Basis – Section 12(2) of CGST Act

Section 12(2) says:

In simple words — whichever of these two happens first, that’s when the GST liability arises.

But there’s a twist (and a relief).

Notification No. 66/2017 – No GST on Advance for Goods

Earlier, even an advance payment triggered GST liability. However, after Notification No. 66/2017 – Central Tax (dated 15.11.2017), the government relaxed this rule.

Now, for goods supplied under forward charge, you don’t need to pay GST on advance received. You only pay GST when the invoice is issued (or the last date by which it should’ve been issued).

This rule does not apply to:

• Composition dealers, and
• Suppliers dealing with specified actionable claims.

Meaning of “Date of Receipt of Payment”

Section 12(2) Explanation 2 defines it as:

So, if you received a cheque on 5th June but recorded it on 10th June, the date of receipt of payment is 5th June (the earlier of the two).

Time of Supply under Forward Charge – In Practice

Let’s go through real examples (taken from ICAI Study Material) to understand how this works in real life.

Example 1 – Partial Supply Covered by Invoice

Scenario: A Ltd. enters into an agreement with B Ltd. to supply 100 kg of raw material. However, A Ltd. only supplies 80 kg and issues an invoice for that quantity.

Analysis: The supply is considered to have been made only for 80 kg, since that’s what’s covered by the invoice. So, GST liability arises only on the invoiced quantity — not the full 100 kg.

Example 2 – Invoice and Payment on Different Dates

Case 1: B Ltd. sells goods to C Ltd. on 10th June and issues the invoice the same day. Payment is received on 20th June.

Time of supply: 10th June (date of invoice).

Case 2: B Ltd. sells goods on 10th June but receives payment on 5th June. The invoice is issued on 10th June.

Time of supply: 10th June again, because GST is linked to the invoice date, not payment date.

Example 3 – Late Invoice Issue

B Ltd. sells goods to C Ltd. on 10th June, but the invoice is issued on 12th June, and payment is received on 20th June. Under Section 31, the invoice should’ve been issued at or before removal/delivery (i.e., 10th June).

Time of supply: 10th June — the last date the invoice ought to have been issued.

Example 4 – Continuous Supply of Goods

Let’s say B Ltd. and C Ltd. have a contract for monthly supply over one year starting January. C Ltd. makes payment every month on the 10th, and B Ltd. issues invoices on the same date.

Time of supply: 10th day of each month — when the invoice is issued for that month’s delivery.

Example 5 – Goods Sent on Approval Basis

When goods are sent “on approval” (say for return or rejection), Section 31(7) applies. Invoice must be issued before or at the time of supply, or within 6 months from the date of removal, whichever is earlier.

Scenario: B Ltd. sends goods to C Ltd. for approval on 10th January. The buyer approves them on 15th August.

Time of supply: 10th July — since 6 months from removal date (10th January) end on that day. That’s when the invoice must be issued, triggering GST liability.

Invoice Rules You Should Know (Section 31 Overview)

The timing of invoice directly affects time of supply. Here’s how Section 31 prescribes it for goods:

• When goods involve movement: - Invoice must be issued before or at the time of removal (for dispatch or transport).
• When there’s no movement: - Invoice must be issued before or at delivery.
• For continuous supply of goods: - Invoice should be issued before or at the time each statement/payment occurs.
• For goods sent on approval: - Invoice must be issued before or at the time of supply or within 6 months from the date of removal.

If you miss these timelines, GST liability arises on the last possible date (even if the invoice was late).

Excess Payment up to ₹1,000 – Optional Timing

Section 12(2) also includes a small flexibility clause. If you receive up to ₹1,000 in excess of the invoice value, you can choose to treat the invoice date as the time of supply for that excess amount.

However, in practice, this clause doesn’t have much relevance anymore, since GST on goods is payable only on invoice issuance.

How It Looks in Flowchart Form (Simplified)

Key Takeaways

• No GST on Advance (for Goods) - You only pay GST when you issue the invoice, not when you get paid.
• Always Watch the Invoice Date - Even a small delay in issuing invoices can shift your tax liability back to the date goods were removed or delivered.
• Keep Track of Continuous Supplies - For ongoing contracts, invoices must match payment or event milestones.
• Approval-based Supplies Have a Cut-off - Never exceed six months from removal without issuing an invoice — GST becomes payable anyway.
• Maintain Accurate Books - Since payment date entries also play a part, your accounts and invoices must sync properly.

Common Mistakes to Avoid

• Delaying invoices after dispatching goods. → Triggers tax liability earlier than expected.
• Confusing service rules with goods rules. → Services still attract GST on advance; goods do not.
• Not updating ERP/accounting systems after Notification 66/2017.
• Ignoring part-supply situations, where invoice covers only part of the delivery.
• Miscalculating continuous supply timing for recurring sales contracts.

Final Thoughts

Determining the Time of Supply for Goods under Forward Charge isn’t just about knowing the law — it’s about timing your invoicing and payments correctly.

If you issue invoices late, GST still becomes due as if you had issued them on time. If you receive advance payments, you can relax — no GST until invoice time (thanks to the 2017 notification).

The key is to align your sales process, invoicing schedule, and accounting records so that GST liability is recognized at the right time — neither early nor late.

When done right, you’ll stay compliant, avoid penalties, and keep your GST filings completely stress-free.

Also Read: Understanding the Concept of Time of Supply under GST