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An order booked before a GST rate change does not, by itself, preserve the old rate. For a supply that crosses the change date, first establish whether the goods or services were supplied before or after the effective date, then apply the matching invoice-and-payment combination under section 14 of the Central Goods and Services Tax Act, 2017 (CGST Act). The applicable rate and change date come from the notification for the specific supply.
What decides the GST rate when an order crosses a change date?
Section 14 of the CGST Act sets a special time-of-supply test for a change in the tax rate. It applies notwithstanding the ordinary time-of-supply rules in sections 12 and 13. The section does not list an order, quotation, purchase-order acceptance or contract date as an independent trigger. Instead, the key facts are when the supply occurred, when the tax invoice was issued and when payment was received.
That means neither of these shortcuts is reliable: “the customer ordered before the change, so the old rate applies” and “the invoice is after the change, so the new rate applies.” Either conclusion can be wrong. Section 14 has separate rules for supplies made before and after the effective date, and each branch turns on the invoice and payment dates.
Use the rate notification for the relevant goods or services to establish the effective date and the rates on either side of it. Section 14 determines which rate timing applies; it does not identify the correct product or service classification, state the rate for a particular supply, or settle whether CGST/SGST or IGST treatment applies.
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Use the section 14 decision table
Let C mean the effective date stated in the applicable rate notification. First decide whether the supply was made before or after C. Then locate the combination of invoice and payment events. The time-of-supply date in the final column is the date to use for deciding which rate applies, subject to the relevant notification and the transaction’s classification.
| When the supply was made | Invoice and payment timing | Section 14 time of supply |
|---|---|---|
| Before C | Both the invoice and payment are after C | Earlier of payment receipt or invoice issue |
| Before C | Invoice before C; payment after C | Invoice issue date |
| Before C | Payment before C; invoice after C | Payment receipt date |
| After C | Payment after C; invoice before C | Payment receipt date |
| After C | Invoice and payment before C | Earlier of payment receipt or invoice issue |
| After C | Invoice after C; payment before C | Invoice issue date |
The table follows the six timing combinations in section 14. “Earlier” means compare the two dates named in that row; do not substitute the order date or a later accounting close. If the records do not establish the supply date, invoice issue date or payment receipt date, resolve that factual gap before choosing a row rather than inferring the result from the order date.
How to work through an existing order
- Find the controlling rate notification. Confirm the classification of the goods or services, the rate before and after the change, the notification’s effective date and any conditions or exceptions. A general announcement or an order-management-system setting is not a substitute for the applicable notification.
- Establish the supply timing. Determine whether the relevant supply falls before or after C under the rules applicable to that transaction. Gather delivery evidence for goods or records of service completion where relevant. A purchase order, quotation or contract can help explain the transaction, but its date alone does not answer the section 14 question.
- Record invoice events separately. Capture the issue date of the tax invoice and preserve the invoice itself. Do not treat the date an invoice was drafted, approved internally or entered into a system as the issue date without checking what was actually issued.
- Establish payment receipt for each amount. Section 14 generally treats payment as received on the earlier of the date it is entered in the supplier’s books and the date it is credited to the supplier’s bank account. Retain evidence of both dates, and check the section’s four-working-day proviso where its condition may apply. Do not use a customer’s transfer initiation date as a replacement for the statutory receipt test.
- Map the facts to one row. Use the supply timing first, then the invoice and payment timing. For part-payments, identify the amount and the supply portion each payment relates to; do not assume one date automatically resolves every part of a mixed transaction.
- Reconcile documents and tax reporting. Check the tax charged against the selected rate and consider whether a receipt voucher, refund voucher, credit note or debit note is required under the applicable provisions. Before amending a filed return or issuing an adjustment document, verify the current rules and the transaction-specific facts.
This sequence separates the legal timing test from classification and recordkeeping. If any of the three date inputs is disputed or unclear, document the evidence and have the relevant tax treatment reviewed rather than filling the gap with a commercial date that section 14 does not identify.
Does an advance payment lock in the old GST rate?
Not automatically. An advance is one of the facts that may determine time of supply, but the outcome depends on the section 14 branch, the supply date, invoice timing and how the amount is legally and factually treated. The table shows why a pre-change payment does not produce the same answer in every case: for a supply after C, payment before C and an invoice after C point to the invoice issue date, while an invoice and payment both before C point to the earlier of those two dates.
CBIC’s GST FAQ gives a historical illustration under section 14: with a rate increase effective 1 June 2017, goods supplied and invoiced after that date were subject to the new 20% rate even though the full advance had been received in April 2017. This is an illustration of the statutory timing rule in that example, not a current rate and not a blanket answer for every advance, supply category or fact pattern.
Distinguish an advance from an unapplied deposit
Calling money a “deposit” in a contract or ledger does not alone determine its treatment. CBIC’s sectoral FAQ distinguishes a deposit relating to a supply from payment: the deposit is not treated as payment unless the supplier applies it as consideration. The practical question is whether the amount remains an unapplied deposit or has been applied to the price of the supply. Record the application date and the supply it covers rather than relying only on the label used when the money was received.
Track partial advances by amount and coverage
For each payment, record what it covers, whether it is consideration or an unapplied deposit, and whether it relates to the full supply or only a portion. The CGST Act’s ordinary section 13 service timing provision says that a supply is deemed made to the extent covered by an invoice or payment. That statement is tied to the cited services rule; it should not be generalized across all goods and services without checking the relevant ordinary time-of-supply provision and any applicable notification.
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Goods and services may also have different ordinary advance rules. CBIC’s sectoral material includes a goods example under section 12(2) in which an advance can trigger GST before the invoice, while its insurance discussion addresses advances in that context. These examples illustrate why the ordinary rule for a category cannot be imported into another category. Where a rate changes, apply section 14’s special timing test and check the underlying supply category rather than assuming all advances work alike.
Which date counts as payment received?
For section 14, payment receipt generally means the earlier of the supplier’s book-entry date and the date the amount is credited to the supplier’s bank account. Keep both records, even if they fall on opposite sides of C. The four-working-day proviso in section 14 can affect the result when its stated condition is met, so check the current statutory wording against the actual bank-credit and book-entry timeline. The supplied facts do not support replacing that check with a universal rule for every delayed bank credit.
In practice, a payment file should make it possible to trace each amount from customer remittance through bank credit and accounting entry to the invoice or supply it relates to. If the remittance covers several orders, or if an amount is initially held as a deposit and applied later, preserve the allocation history. This avoids treating a single bank statement date as the answer for amounts whose commercial and accounting application differs.
Vouchers, invoices and adjustment documents
Receipt and refund vouchers
The CGST Act requires a registered person receiving an advance to issue a receipt voucher. It also provides for a refund voucher where the contemplated supply does not occur and no tax invoice is issued in pursuance of that receipt voucher. Keep the voucher connected to the payment record and the intended supply so the transaction history remains clear if the order is cancelled or changed.
Service invoice timing
CBIC’s invoice-rules material states that a taxable service invoice is generally due within 30 days from the date of service. It identifies specified 45-day exceptions for insurers, banks, financial institutions including non-banking financial companies, and stated special circumstances. The applicable deadline depends on the supplier and service, so verify the current rule and the relevant exception instead of treating either period as universal. Invoice timing matters independently in the section 14 table.
Credit and debit notes
The Act permits credit notes in stated circumstances and requires debit notes when the taxable value or tax invoiced is less than the amount payable. These are not interchangeable tools for correcting any inconvenient rate outcome. Check the statutory conditions and the facts before issuing either document, including whether the original invoice, supply and tax treatment support the proposed adjustment. Also verify the current return treatment before changing reported tax.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Records to keep for each affected order
A compact transaction file makes the timing decision reviewable by finance staff, auditors and tax advisers. Retain records that establish classification, the effective date, the supply event, invoice issuance and payment receipt. A practical file includes:
- The applicable rate notification, effective date and the basis for classifying the goods or services.
- The purchase order or contract, including amendments that change scope, quantity, delivery or price.
- Proof of delivery or service completion that supports the supply-timing determination.
- The tax invoice and evidence of when it was issued.
- For each advance or part-payment, the receipt voucher, bank-credit evidence, supplier book-entry date, allocation to the supply and any later application of a deposit.
- Any refund voucher, credit note or debit note, with the reason for issuing it.
- The calculation and return treatment used to reconcile the section 14 time of supply with the rate charged.
This is a practical recordkeeping list drawn from the facts a business needs to establish, not a separate statutory checklist. It is especially useful where different portions of an order are delivered, invoiced or paid on different dates.
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- Using the order date as the deciding date. Section 14’s listed triggers are supply timing, invoice timing and payment timing. Keep the order date as commercial context, not as a substitute for those facts.
- Applying the new rate to every invoice issued after C. For a supply before C where the invoice is before C and payment after C, section 14 points to the invoice date. Other combinations produce different results.
- Assuming any pre-change advance preserves the old rate. Check the full combination in the table, and establish whether the amount was payment or an unapplied deposit.
- Conflating an advance with a deposit. Record whether and when a deposit was applied as consideration. The account description alone may not establish its treatment.
- Using the customer’s transfer date as the receipt date without checking. Compare the supplier’s book-entry date and bank-credit date, then assess the four-working-day proviso in the statutory text.
- Applying a rule for goods to services or vice versa. Ordinary advance and invoice rules can differ by category. Confirm the relevant provisions and any special treatment rather than making one blanket assumption.
- Correcting tax documents before resolving the facts. First settle classification, rate notification, supply timing and the section 14 row; then determine whether the voucher or adjustment-document rules apply.
What this general guide does not determine
The correct rate for a real transaction depends on its specific classification and the notification in force for that supply, including any conditions or exceptions. The applicable tax treatment may also depend on whether the transaction is intra-State or inter-State and on any special or reverse-charge provisions. No particular product, service or rate is identified here, so this guide cannot establish a customer’s liability or produce a transaction-specific tax calculation. Verify the current legal text and notification for the actual transaction before charging tax, revising documents or changing a filed return.
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