Example

ABC Ltd. supplies machinery for Rs 5,85,000 for manufacture of nuts and bolts to X Ltd on 20th April 2018. ABC Ltd. also enters into contract with X Ltd. separately for providing repair and maintenance service of machinery supplied by it on the first day of every month for 3 years. The payment for repair and maintenance becomes due on the same day on which service is provided. Determine when ABC Ltd. should issue invoice for supply of machinery as well as for repair and maintenance service?

Answer

In case of supply of goods, invoice shall be issued on or before the time of removal of goods for supply to the recipient as per section 31 of CGST Act.

Therefore, ABC Ltd. is required to issue invoice for supply of machinery to X Ltd on or before 20th April 2018.

However contract of repair and maintenance service is a continuous supply of service defined u/s 2(33) of CGST Act as it is provided or agreed to be provided on continuous/ recurrent basis for a period exceeding 3 months.

As per section 31 (5) Subject to the provisions of clause (d) of sub-section (3), in case of continuous supply of services,''

(a) where the due date of payment is ascertainable from the contract, the invoice shall be issued on or before the due date of payment;

(b) where the due date of payment is not ascertainable from the contract, the invoice shall be issued before or at the time when the supplier of service receives the payment;

(c) where the payment is linked to the completion of an event, the invoice shall be issued on or before the date of completion of that event.

Thus, the invoice for repair and maintenance is required to issue on or before the first day of every month.