Continuous supply of goods and services under GST
In this article, we will discuss the term ‘Continuous Supply’ in context of GST laws in India and discuss about how GST shall be levied on goods & services which falls under the continuous supply. The term “Continuous Supply” has been defined by Section 2(32) & 2(33) of the CGST Act, 2017. Before understanding the tax implication thereof, the definition of ‘Continuous Supply’ is explained here below.
What is Continuous Supply of Goods?
As per Section 2(32) of CGST Act, ‘Continuous Supply of Goods’ means:
- A supply of goods which is provided or agreed to be provided, continuously or on recurrent basis
- Under a contract
- Whether or not by means of a wire, cable, pipeline or other conduit and
- For which the supplier invoices the recipient on a regular or periodic basis and
- Includes supply of goods as notified by the Government
Thus, the definition of 'Continuous Supply of Goods' have five important elements as below:-
(a) There should be a supply of goods on a continuous or recurrent basis. The word ‘recurrent’ means frequently or regularly. Thus, we can interpret that where there is an agreement to supply an agreed quantity of goods over a period of time in multiple consignments to a customer, it would be treated as continuous supply of goods.
(b) The supply should be under a contract. However, the contract need not be in writing.
(c) Supply of goods may be done by means of a wire, cable, pipeline or conduit. The words “Whether or not” in the definition shows that the above list is only illustrative. The supplier may deliver goods through other transport means to be treated as a continuous supply.
(d)The supplier invoices the customer on a regular or a periodic basis as agreed between them.
(e)The Government may notify or specify any goods supply of which shall be treated as continuous supply of goods.
When to issue invoice in case of continuous supply of goods?
In case of continuous supply of goods, where successive statements of accounts or successive payments are involved, the invoice shall be issued before or at the time each such statement is issued or, as the case may be, each such payment is received.
What is continuous supply of services?
As per section 2(33) of the CGST Act, ‘Continuous supply of services’ means: -
- A supply of services which is provided or agreed to be provided, continuously or on recurrent basis
- Under a contract, for a period exceeding 3 months with periodic payment obligations
- And includes supply of such services as the Government may notify.
How to issue invoice in case of continuous supply of services?
In case of continuous supply of services: -
(a) If due date of payment is ascertainable from the contract, the invoice shall be issued on or before the due date of payment.
(b) If due date of payment is not ascertainable from the contract, the invoice shall be issued by the supplier before or at the time of receiving payment.
(c) If the payment is linked to completion of an event, the invoice shall be issued on or before the date of completion of that event.
Issue of invoice where supply of service ceases under a contract before completing the supply:
In this case, the invoice shall be issued at the time when the supply ceases. The invoice shall be raised to the extent of the supply made before such cessation.
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