When an Indian GST rate changes, apply section 14 of the CGST Act to the supply, invoice and payment dates; do not choose a rate simply from the date an advance, return or credit note appears in a later return. For an advance, keep evidence of when it was entered in the supplier’s books and when it was credited to the bank. For returned or deficient invoiced supplies, assess the statutory credit-note conditions separately from the rate on the original supply.
This guide concerns India’s CGST framework and corresponding applicable state/UT or integrated GST provisions. The effective date in the relevant rate notification and the law applicable to the tax period matter; confirm both before filing or advising on a particular transaction.
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How section 14 determines the rate when GST changes
Section 14 of the CGST Act overrides the ordinary time-of-supply rules in sections 12 and 13 for a change in the rate of tax. It uses three facts: whether the supply was made before or after the effective date of the change, whether the invoice was issued before or after that date, and whether payment was received before or after it.
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| Supply timing | Invoice timing | Payment timing | Section 14 determining date |
|---|---|---|---|
| Before the rate change | After the change | After the change | Earlier of the invoice date or payment-receipt date |
| Before the rate change | Before the change | After the change | Invoice date |
| Before the rate change | After the change | Before the change | Payment-receipt date |
| After the rate change | After the change | After the change | Earlier of the invoice date or payment-receipt date |
| After the rate change | Before the change | After the change | Payment-receipt date |
| After the rate change | After the change | Before the change | Invoice date |
These are the six combinations specified in section 14. If the facts do not fit a row—for example, because the supply date is disputed or the transaction involves a special supply arrangement—do not force a result from the table alone. Check the applicable time-of-supply rules, current legal text and rate notification.
Work out the payment date before applying the table
For section 14, payment is generally 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. The section also has a proviso for a bank credit more than four working days after the rate change: in that circumstance, the bank-credit date is treated as the date of receipt. Preserve both records rather than relying only on the date the customer initiated a transfer or the date an advance was later adjusted.
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- Keep the receipt voucher or other advance record and the date of the books entry.
- Keep bank evidence showing the credit date.
- Keep the supply evidence and the invoice, including its issue date.
- Record the effective date stated in the rate notification that applies to the supply.
What to do when an advance crosses the rate-change date
An advance does not, by itself, establish which rate applies. Use the relevant statutory timing rule, including section 14 when a rate change is involved. Do not treat the invoice or return-adjustment date as an independent rate-selection rule.
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For goods, do not automatically apply the portal FAQ’s service-advance guidance. Consider the applicable section 12 rule, section 14 if the rate changed, invoice timing and any current amendments or notifications. CBIC’s older GST FAQ includes a historical goods example in which goods supplied and invoiced after a rate change attracted the new rate despite a full advance before the change. That example illustrates a timing analysis; it is not a substitute for applying the current rules to the actual facts.
How to handle a refunded advance when the supply does not happen
If the proposed supply is abandoned, no supply takes place and no tax invoice follows, distinguish the returned advance from a credit note for an invoiced supply. Section 31(3)(e) provides for a refund voucher against the receipt voucher. CBIC’s FAQ says tax paid on a refunded advance can be adjusted in the return.
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The precise return entries can depend on the facts and current portal procedure. Do not assume that every returned advance is a section 34 credit note, or that the adjustment is available without checking what was reported and whether a tax invoice or supply occurred.
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Section 34 permits a supplier to issue a credit note where the original tax invoice overstates taxable value or tax payable, goods are returned, or the goods or services are deficient. The supplier declares the note in the return for the month in which it is issued, subject to the applicable statutory outer time limit. The limit has been amended over time; check the version of the Act and return guidance in force for the relevant supply and tax period rather than relying on an older September-based cutoff.
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A credit note does not automatically let the supplier reduce output tax. Section 34 restricts a reduction where the incidence of tax and interest on the supply has been passed to another person. Check that condition, as well as the statutory grounds and reporting deadline, before reducing tax liability.
When goods are returned after a rate change, the return may be a ground for a credit note, but the return date and credit-note issue date do not determine the rate on the original supply. Apply section 14 to the original transaction and assess the section 34 conditions for the proposed adjustment separately.
When a debit note is needed after a rate change
If the original tax invoice understated taxable value or tax payable, section 34 requires a debit note, which the supplier declares in the return for the month it is issued. Where the understatement is identified after a rate change, apply both the debit-note rule and the section 14 timing analysis. The later debit-note date alone does not decide which rate applies to the underlying supply.
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A practical check before filing
- Identify the governing rate change. Find the applicable notification and its effective date for the supply and jurisdiction.
- Establish the supply timing. Determine whether the supply was made before or after that date under the applicable rules.
- Record invoice timing. Use the actual invoice issue date, not just its accounting or upload date.
- Verify payment receipt. Compare the books-entry date with the bank-credit date and apply section 14’s four-working-day proviso where relevant.
- Classify the adjustment. Decide whether this is an advance adjusted against a later invoice, a refunded advance with no supply, or a credit/debit note relating to an invoiced supply.
- Check eligibility and filing rules. For a credit note, verify the statutory ground, passed-on tax-incidence restriction and deadline. Confirm current return mechanics for the relevant tax period.
Partial advances, continuous supplies, bundled supplies, disputed supply dates and other non-standard facts may require analysis beyond this framework. Consult the current statutory text, applicable notification and a qualified Indian GST professional where those facts affect the result.
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