Time of Supply of Goods under Reverse Charge (With Examples)

When we talk about GST compliance, most people think of sellers collecting tax from buyers and depositing it with the government. That’s true in most cases — it’s called the forward charge mechanism.

But there’s another side to the story — the reverse charge mechanism (RCM) — where the buyer, not the seller, becomes liable to pay GST. And that’s where the concept of Time of Supply under Reverse Charge becomes really important.

Let’s break this down in plain English and go through real examples to make it crystal clear.

What is Reverse Charge Mechanism (RCM)?

Under normal GST rules, the supplier of goods or services collects GST and pays it to the government.

Under RCM, this gets flipped. The recipient (the buyer) is responsible for paying GST directly to the government instead of the supplier.

This mechanism generally applies to:

• Specified goods or services listed by the government (like certain notified categories under Notification No. 4/2017-Central Tax (Rate)), or
• Supplies made by unregistered suppliers to registered persons (under certain conditions).

In both cases, the buyer has to determine the correct “time of supply” — because that’s when the tax liability arises and must be reported in the return.

Legal Provision – Section 12(3) of the CGST Act, 2017

Section 12(3) lays down the rules for determining time of supply of goods under reverse charge. It states:

“In case of supplies of goods in respect of which tax is paid or liable to be paid on reverse charge basis, the time of supply shall be the earlier of the following dates:

• The date of receipt of goods; or
• The date of payment as entered in the books of account of the recipient or the date when payment is debited from the recipient’s bank account, whichever is earlier; or
• The date immediately following 30 days from the date of issue of invoice by the supplier.”

If none of these can be determined, the time of supply shall be the date of entry in the books of the recipient.

Breaking It Down (Simple Explanation)

So basically, under reverse charge:

• You (the buyer) must check three key dates — receipt, payment, and 30 days from supplier’s invoice.
• The earliest of these three becomes your time of supply — i.e., the date you become liable to pay GST.

If you can’t identify any of these (say, missing invoice date or unclear records), then the fallback is the date you record the purchase in your books.

How “Date of Payment” is Determined

As per Explanation 2 to Section 12(3):

This ensures that you can’t delay liability by recording payment late in books.

Let’s Understand with Examples

Now let’s go through some clear examples to see how these rules actually apply.

Example 1 – Earliest Date is Goods Receipt

• Invoice issued by supplier: 4th June
• Goods received by recipient: 12th June
• Payment recorded in books: 30th June
• Payment debited from bank: 2nd July

Time of Supply: 12th June

Why? Because among the three possible dates (goods receipt, payment, 30 days from invoice), the earliest is 12th June — the date goods were received. Hence, the buyer must pay GST in June’s return.

Example 2 – 30-Day Rule Applies

• Invoice issued: 4th June
• Goods received: 6th July
• Payment recorded in books: 21st July
• Payment debited: 31st July

Time of Supply: 5th July

Why? 30 days from invoice date (4th June + 30 days = 4th July). So the time of supply is the day immediately following — 5th July. Even though goods were received later (6th July), GST liability arises as per law on 5th July.

Example 3 – Payment Before Receipt

• Invoice issued: 4th June
• Goods received: 27th June
• Payment recorded in books: 10th June
• Payment debited from bank: 2nd July

Time of Supply: 10th June

Why? Because payment was recorded earlier (10th June), which is before goods were received (27th June) or 30 days from invoice (5th July). So, 10th June becomes the earliest date.

Example 4 – Invoice Date Ignored Beyond 30 Days

• Invoice issued: 10th January
• Goods received: 5th February
• Payment recorded: 15th March
• Payment debited: 17th March

Time of Supply: 9th February

Why? 30 days from invoice date = 9th February. Since none of the other events (receipt/payment) occurred before that, the time of supply is 9th February.

Example 5 – Missing Information (Fallback Rule)

Suppose none of these dates can be verified — maybe the invoice is misplaced, or payment details aren’t traceable. Then, as per Section 12(3) proviso, the time of supply will be the date of entry in the recipient’s books of account — the day the purchase is recorded.

How This Affects Compliance

For businesses under reverse charge, knowing the correct time of supply helps with:

• Accurate GST reporting in the correct return period
• Avoiding interest or penalties for late payment
• Ensuring proper ITC claim, since ITC can only be availed after paying the tax

Remember — even though the supplier issues the invoice, it’s you (the recipient) who must:

• Calculate the GST liability
• Pay it through cash (cannot use ITC for RCM payment)
• Claim input tax credit later (subject to conditions)

RCM Example: Purchase from Unregistered Supplier

Let’s take a practical example.

Scenario: XYZ Ltd. (registered) purchases goods from a local transporter (unregistered). Under Section 9(4), XYZ Ltd. must pay GST under RCM.

• Invoice from supplier: 10th May
• Goods received: 12th May
• Payment made: 5th June

Time of Supply: 12th May — earliest of the three events.

Hence, XYZ Ltd. must pay GST in its May return, even though payment was made in June.

RCM Example: Import of Goods

For imports, Customs duty and IGST are generally levied under the Customs Tariff Act, not under Section 12. However, for clarity — the time of supply for import of goods is when the goods are cleared for home consumption, as per the Customs Act.

This distinction helps avoid double taxation.

Comparison – Forward Charge vs Reverse Charge (Goods)

Key Points to Remember

• Always track three events — receipt, payment, and invoice.
• Choose the earliest date — that’s when GST liability arises.
• Maintain proper documentation — because you’re the one responsible for payment.
• Claim ITC only after paying tax under RCM.
• Even small delays can cause interest liability, so align your accounting timelines.

Common Errors Businesses Make

• Treating RCM like forward charge. → Under RCM, you can’t wait till invoicing; GST is triggered earlier.
• Recording payment late in books. → The law uses the earlier date — so record payments on time.
• Missing the 30-day rule. → After 30 days from supplier invoice, liability arises automatically.
• Not maintaining clear purchase documentation. → This leads to audit issues, since RCM liability depends on date verification.

Quick Recap Table

Final Thoughts

The Time of Supply of Goods under Reverse Charge may sound like a dry compliance rule, but it’s one of the most practical aspects of GST accounting. Why? Because under RCM, the buyer shoulders the tax responsibility.

Getting the timing right means:

• Paying GST in the correct month
• Claiming ITC smoothly
• Avoiding unwanted notices or late fees

So, the golden rule?

👉 Track your dates carefully — goods receipt, payment, and invoice.

Whichever happens first, that’s when GST liability under RCM kicks in.

Also Read: Time of Supply of Goods under GST – Forward Charge Explained