For a service supply covered by the foreign-associated-enterprise proviso to section 13(3), the time of supply is the recipient’s book-entry date or payment date, whichever is earlier. Waiting for the overseas invoice or cash settlement can therefore put the tax in the wrong period.
This article is a historical compliance review of FY 2025–26, checked on 24 October 2026. Every illustration assumes an actual taxable service import, reverse-charge liability, the foreign supplier’s location and associated-enterprise status have already been established. Rates and taxable values are stated assumptions, not conclusions that every group recharge is taxable at the same rate. Post-1 April 2026 income-tax cross-references and procedures require their applicable legislative framework; this article does not carry legacy section numbering forward as current advice.
Separate taxability, valuation and timing
ICAI’s April 2026 compilation of the actual CGST and IGST provisions reproduces the special proviso in section 13(3), the associated-enterprise definition in section 2(12), and the IGST framework. First establish that a supply exists, that it is an import under the relevant location and place-of-supply rules, and that reverse charge applies. Then determine the taxable value and classification. Only then assign the liability to a period.
An accounting related-party flag is not a substitute for the GST statutory associated-enterprise test. Equally, a payment described as reimbursement is not automatically outside GST. Contracts, allocation schedules and the actual service determine the analysis. Where valuation of a group service is unresolved, the absence of an invoice should trigger a valuation workstream, not an assumption that no timing question exists.
Do not use an outdated universal sixty-day rule
The same statutory compilation records amendments effective from 1 November 2024: the supplier-invoice limb is qualified by cases where the supplier must issue the invoice, and clause (c) deals with cases where the recipient must issue it. The special foreign-associated-enterprise proviso must still be applied to its own facts. A spreadsheet that simply adds sixty days to every overseas invoice is therefore unsuitable for this population.
Recipient invoicing and supporting-document requirements remain separate compliance tasks. Preparing a document later does not allow the business to choose a later time of supply under the special proviso. Conversely, the document’s existence does not resolve place of supply, exemption, valuation or the associated-enterprise relationship.
What a year-end accrual review should examine
Extract actual service accruals, intercompany payable entries, payment advances and subsequent reversals. For each item identify the service, counterparty, amount, original journal date, effective accounting date, payment evidence and later invoice. A generic budget or an unsupported forecast is not automatically the same as a book entry for an identified supply. Record why a particular provision does or does not represent the relevant supply instead of adopting a rule that all provisions are taxable or none are.
Link a later invoice to the original accrual so the same supply is not taxed twice. A reversal can correct an erroneous or duplicate entry, but a routine next-month reversal followed by rebooking does not erase the genuine original event. When the original estimate and final taxable value differ, determine the appropriate adjustment and reporting procedure on the facts. Do not silently net a historical omission against a current-period entry.
Turn the finding into a period-by-period reconciliation
Maintain separate columns for the legal time of supply, tax actually discharged, return period and any subsequent adjustment. Explain exceptions at invoice level. Payment evidence should include both the ledger and bank records rather than just a treasury payment request. An eligible input tax credit expectation does not, by itself, establish that an omitted reverse-charge liability can be ignored. This article does not compute late-payment interest or prescribe a particular return-correction route without the necessary filing facts.
Worked illustrations
These illustrations use fictional facts and expressly stated assumptions. Amounts are Indian rupees unless a different currency or unit is specified. They are independent examples, not findings about any actual client.
Illustrative example 1: A March accrual precedes settlement
An identified service has an accepted taxable value of ₹1,00,000. It is entered in the recipient’s books on 31 March 2026 and paid on 20 April 2026. With an assumed applicable IGST rate of 18%, the tax is ₹18,000 and the special-rule time of supply is 31 March. April settlement does not move this liability out of the March period.
Illustrative example 2: An advance precedes the service liability entry
Payment of ₹2,00,000 for a specifically identified taxable service is made on 10 June 2025; the related service liability is recorded on 30 June. Assuming payment is the earlier relevant event and 18% applies, time of supply is 10 June and tax is ₹36,000. A mere refundable deposit with no established supply would require a different preliminary analysis.
Illustrative example 3: The supplier invoices after quarter-end
A genuine ₹5,00,000 service liability is booked on 30 September 2025. The supplier invoice arrives dated 25 October and payment follows on 20 November. At the assumed 18%, ₹90,000 belongs to the 30 September time of supply. Adding sixty days to the October invoice would miss the special rule.
Illustrative example 4: Two separately identifiable supplies
Supply A, taxable value ₹40,000, is paid on 5 July 2025 and booked on 20 July. Separate supply B, ₹60,000, is booked on 20 July and paid on 10 August. At 18%, A produces ₹7,200 with a 5 July trigger and B ₹10,800 with a 20 July trigger: ₹18,000 altogether. The example concerns two established supplies, not an unexplained apportionment of one uncertain contract.
Illustrative example 5: Bank evidence precedes a delayed payment journal
For a ₹2,50,000 identified supply, the actual payment is debited by the bank on 8 August 2025, recorded in the payment ledger on 10 August, and the service liability is booked on 20 August. The bank debit substantiates the earlier payment event. On these facts the trigger is 8 August; assumed 18% tax is ₹45,000. A later accounting entry cannot conceal the earlier payment.
Illustrative example 6: A duplicate accrual is not a second service
The same ₹1,00,000 service is accidentally accrued twice, creating ₹2,00,000 in the ledger. Evidence establishes one actual supply with taxable value ₹1,00,000. At 18%, the supply’s tax is ₹18,000, not ₹36,000 merely because a journal was duplicated. Correct and document the error; if tax was already discharged twice, the recovery or adjustment route must be separately established.
Illustrative example 7: Adjacent periods must remain separate
An identified ₹1,00,000 liability is booked on 30 June 2025 and another ₹1,50,000 liability on 1 July; both are paid later. Assumed 18% tax is ₹18,000 for the first trigger and ₹27,000 for the second, totalling ₹45,000. A single August treasury settlement does not justify consolidating both into the August time-of-supply period.
Ten-step verification table
| Step | Verification | Evidence to retain |
|---|---|---|
| 1 | Identify the actual service and foreign supplier. | Agreement, deliverables and supplier-location evidence. |
| 2 | Establish associated-enterprise status for the relevant period. | Statutory relationship analysis, not just an ERP flag. |
| 3 | Confirm import and reverse-charge applicability. | Location, place-of-supply and charging/exemption analysis. |
| 4 | Determine classification, rate and taxable value. | Valuation calculation and rate authority. |
| 5 | Extract original accrual and payable entries. | Journal audit trail and supply mapping. |
| 6 | Reconcile advances and actual payments. | Payment ledger, bank debits and contract references. |
| 7 | Select the earlier special-rule event. | Dated time-of-supply working for each supply. |
| 8 | Link subsequent invoices and reversals. | Accrual-to-invoice reconciliation and error explanations. |
| 9 | Compare liability with the appropriate filing period. | Return and tax-discharge reconciliation. |
| 10 | Resolve omissions and adjustments through the applicable procedure. | Approved correction, interest and credit review workpapers. |
Sixteen practitioner FAQs
1. Is a missing foreign invoice enough to postpone GST?
No, where the special proviso applies and the relevant book entry or payment has already occurred.
2. Does the article treat every foreign payment as an import?
No. Actual supply, location, place of supply and charging conditions must first be established.
3. Does a related-party accounting label prove associated-enterprise status?
No. Apply the statutory test applicable to the period.
4. Does the ordinary sixty-day worksheet settle these cases?
No. It overlooks the special proviso and can also overlook the amended invoice clauses.
5. Are budget provisions automatically taxable?
No blanket conclusion is justified. Identify whether the entry concerns an actual supply and analyse its facts.
6. Can the business reverse a genuine accrual to reset time of supply?
An accounting reversal does not itself undo the original genuine event. Trace the supply and the reason for reversal.
7. Should the same later invoice be taxed again after accrual-based discharge?
Reconcile it to the original supply to prevent duplication; separately address any final valuation difference.
8. Does every reimbursement have zero taxable value?
No. The description does not replace the underlying supply and valuation analysis.
9. Can the recipient’s later invoice date override the special trigger?
It does not create a general option to defer a time of supply already determined by the special proviso.
10. Are the illustrations’ 18% rates universal?
No. They are explicit assumptions used to demonstrate timing and arithmetic.
11. Why review bank debits as well as the ledger?
They can reveal that payment occurred before a delayed posting or approval record suggests.
12. Does full prospective ITC remove the need to discharge RCM?
Expected credit is not a substitute for checking liability, payment and credit conditions separately.
13. Is a duplicate journal proof of two supplies?
No. Reconcile the economic and contractual facts and retain evidence of the error.
14. Can all year-end differences be netted into the current return?
Do not assume that. The proper adjustment route depends on the original discharge, period and applicable procedure.
15. Does this guide use FY 2025–26 tax references for later years?
No. Its historical scope is deliberate. Later periods require the legislation and cross-reference framework then applicable.
16. What is the most useful recurring control?
An accrual-to-payment-to-invoice reconciliation with the original statutory trigger preserved and reviewed for every exception.
Conclusion
For FY 2025–26, preserve the original book-entry and payment evidence for each established foreign-associated-enterprise service. Reconcile later invoices to those events, then resolve period errors through the applicable reporting procedure rather than an invoice-date shortcut.