Introduction:
In the current tax framework, understanding the time limits for issuing invoices under GST and the implications of TDS under Income Tax is crucial for businesses, especially those offering HR services. The timing of the issuance of invoices directly impacts the GST filing, and the deduction of TDS must align with the time of payment or credit, whichever is earlier. Moreover, with the amendments coming into effect from 1st April 2025, businesses must stay updated with changes to ensure compliance.
This guidance note outlines:
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The time limits for invoice issuance under GST for HR services,
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The interplay between TDS and GST,
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The law language as per the CGST Act and Income Tax Act, and
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Examples and practical advisories to ensure seamless compliance.
Time Limit for Issuance of Invoices under GST
GST Time Limits for Issuing Invoices for Goods:
Section 31(1) of the CGST Act, 2017 stipulates the following for issuing invoices on the supply of goods:
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In case of supply of goods involving movement: The tax invoice must be issued before the removal of goods for supply to the recipient. This means that the invoice is required before the goods are shipped to the buyer, ensuring that the tax is accounted for as soon as the goods are dispatched.
Law Language: "A registered person supplying taxable goods shall issue a tax invoice before or at the time of removal of goods for supply to the recipient."
Interpretation: If the goods are being shipped to a buyer in another state or location, the invoice must be issued before dispatch. -
In case of supply of goods without movement: If the supply does not involve the movement of goods (for example, for installation or construction services), the invoice must be issued before or at the time of delivery of the goods.
Law Language: "Where the supply does not involve the movement of goods, the tax invoice shall be issued before or at the time of delivery of goods to the recipient."
Interpretation: The key point here is that the invoice must reflect the point at which the buyer gains control of the goods. -
Continuous Supply of Goods: In cases of continuous supply of goods (e.g., subscription-based services or recurring supply), the invoice must be issued before or at the time of each payment or statement of accounts provided by the supplier.
Law Language: "Where successive statements of accounts or successive payments are involved, the invoice shall be issued before or at the time of each such statement or payment."
Interpretation: For continuous supplies, each payment or statement triggers the requirement to issue an invoice.
GST Time Limits for Issuing Invoices for Services:
As per Section 31(2) of the CGST Act, 2017, the time limits for issuing invoices for the supply of services are as follows:
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Normal Supply of Services: For services provided, the invoice must be issued within 30 days from the date of supply of services.
Law Language: "A registered person supplying taxable services shall, subject to the provisions of section 12 of the Act, issue an invoice, before or at the time of supply of such service."
Interpretation: In essence, for HR services, such as outsourced manpower or professional services, the invoice must be raised within 30 days of providing the service. -
Continuous Supply of Services: For services that are supplied continuously (e.g., HR outsourcing services), the invoice must be issued before or at the time of each payment or statement of accounts issued by the supplier.
Law Language: "In case of continuous supply of services, the invoice shall be issued before or at the time of each payment or statement of accounts."
Interpretation: In HR services, if payment is received monthly or quarterly, the invoice must be issued at each payment stage.
Example for HR Services: Invoice Issuance on 31st March 2025
Let’s consider a scenario in which an HR outsourcing service was provided throughout March 2025.
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Invoice for Services: The service provider must issue the invoice on or before 31st March 2025. This is because the service was provided during March 2025, and under Section 31(2), the invoice must be issued within 30 days of the service being provided. Hence, raising the invoice on 31st March 2025 is perfectly compliant.
Law Language: "The invoice for the services rendered in a month shall be issued within 30 days from the end of the month."
TDS and GST Interaction
The TDS provisions under Section 194J of the Income Tax Act apply to payments made for professional or technical services, including HR services. Under these provisions, the TDS is deducted at the time of payment or credit, whichever occurs first.
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TDS Deduction: TDS on HR services is deducted at 10% when the payment exceeds INR 30,000 in a financial year.
Section 194J of the Income Tax Act:
"Any person making payment to a resident for professional or technical services shall deduct tax at the rate of 10% at the time of credit or payment, whichever is earlier."Interpretation: Whether the payment for the service is made on 31st March 2025 or 1st April 2025, the deduction should occur at the time of credit or payment, whichever is earlier.
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Example: If the invoice is issued on 31st March 2025 for services rendered in March 2025, but the payment is made on 1st April 2025, TDS will be deducted on 1st April 2025, as that is when the payment was made.
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Amendments in GST Law from 1st April 2025
Starting from 1st April 2025, there will be significant amendments to GST provisions affecting continuous supply of services, including HR services:
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Continuous Supply of Services: New guidelines may be introduced for invoicing and GST returns related to the continuous supply of services. The amended provisions will likely streamline the timing of invoice issuance for periodic services (like HR outsourcing) to ensure more consistent reporting and GST compliance.
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GST Returns and Filing Deadlines: As per the amendments, there will be more structured filing requirements for businesses engaged in continuous services, ensuring real-time matching of invoices and tax returns.
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TDS on GST and Adjustments: There may be new provisions on how TDS deductions are reported and adjusted in the GST returns, which could affect businesses providing HR services.
Columnar Guidance on Invoice Issuance, TDS Deduction, and GST Filing
| Aspect | Up to 31st March 2025 | From 1st April 2025 | Key Consideration |
|---|---|---|---|
| Invoice for Services | Raise by 31st March 2025 for services provided in March 2025 | New GST invoicing rules for continuous services post-1st April 2025 | Ensure timely invoice issuance for March 2025 services by 31st March |
| TDS on Payment | Deducted at the time of payment or credit (whichever is earlier) | TDS rules remain unchanged from 1st April 2025 | Deduct TDS at the time of credit/payment to avoid mismatches in returns |
| Continuous Supply | Invoices issued after completion of service or at end of service period | New rules for continuous supply services for better matching in returns | Stay updated on new invoicing timelines for continuous services |
| GST Returns Filing | File GSTR-1 and GSTR-3B as per invoice dates | More structured filing requirements for continuous service providers | Review updated GST return filing procedures post-April 2025 |
Conclusion:
For HR services and continuous supply of services, the invoice must be issued by 31st March 2025 for services rendered during March 2025. The TDS will be deducted on the payment or credit (whichever is earlier), as per Section 194J of the Income Tax Act.
The amendments in GST from 1st April 2025 will bring in more streamlined procedures for continuous service providers, including HR outsourcing companies. As such, businesses must remain aware of the new rules to ensure compliance with both GST and TDS obligations.
This guidance note highlights the important aspects related to invoice issuance under GST, the interaction with TDS, and provides clear examples for better understanding. Stay prepared for the upcoming changes in GST law to maintain smooth compliance and avoid any mismatches or penalties.
