GST Invoicing: Continuous Supply, Goods on Approval & Reverse Charge

Definition & Context
- Refers to situations where goods are supplied on a regular, periodic basis without a discrete, single dispatch.
- Typical in manufacturing, construction, or office‐consumable scenarios where inputs/consumables must be replenished continuously.
Real-World Examples
- XYZ Construction Co. receives river sand and bricks from its vendors on a rolling basis.
- Weekly or fortnightly delivery of water cans to corporate premises.
- Continuous supply of printing & stationery items to business houses.
Invoicing Rule
- A successive statement of accounts (weekly/fortnightly) is issued by the supplier.
- Invoice Timing: Must be raised before or at the time of issuing the statement of accounts.
Significance / Compliance Angle
- Ensures the tax liability crystallises consistently with cash-flow cycles.
- Reduces the risk of missed tax periods or mismatched Input Tax Credit (ITC) for the recipient.

Nature of Transaction
- Goods are removed from the supplier’s premises without a confirmed sale; title passes only upon buyer’s approval.
Mandatory Tax-Invoice Timeline (whichever is earlier):
1. When it becomes known that the supply has taken place (i.e. buyer formally accepts/approves the goods).
2. Six months from the date of removal of goods from the supplier’s premises.
Practical Implication
- Forces a hard cut-off (6 months) so supplies cannot stay in limbo indefinitely, aligning tax incidence with economic reality.

Rule 55(1)(c)
- Allows use of a delivery challan (instead of tax invoice) for the initial transportation when transaction is other than supply (e.g. goods on approval).
Rule 55(4)
- Enables the supplier to issue the tax invoice after delivery when immediate invoicing at the time of dispatch is impractical.
Operational Take-away
- Delivery challan contains reference numbers that later tie back to the formal invoice, ensuring audit traceability.

Key Points
- Goods on approval may move with a delivery challan + e-way bill (wherever e-way bill is applicable).
- Supplier can carry a physical invoice book during transit and issue the invoice on-the-spot once the customer approves (i.e. “when supply is fructified”).
Real-World Benefit
- Prevents misuse of the “approval” window while maintaining operational flexibility for businesses like jewellery showrooms, machinery demos, etc.

Reverse Charge Definition (Sec 2(98))
- Liability to pay GST shifts from the supplier to the recipient for notified goods/services.
- Triggered under:
- $\text{Sec. 9(3)} \;\text{or}\; \text{Sec. 9(4)}$ of the CGST Act.
- $\text{Sec. 5(3)} \;\text{or}\; \text{Sec. 5(4)}$ of the IGST Act.
Supplier’s Registration Status
- Supplier may be registered or unregistered.
- If registered, supplier must still issue a tax invoice in the normal course.
- Recipient then self-assesses and pays GST under RCM.
Compliance Steps for Recipient
1. Issue self-invoice if the supplier is unregistered (not fully covered in excerpt but implied by Sec 31(3)(f) framework).
2. Report liability in GSTR-3B and claim eligible ITC in GSTR-2B/2A subject to conditions.
Rationale & Impact
- Targets tax leakage in sectors with many unregistered suppliers (e.g. certain goods, cashew nuts, bidi leaves, etc.).
- Shifts compliance burden but allows ITC flow to stay intact for the registered ecosystem.

Timely invoicing fosters transparency and accurate revenue reporting to the exchequer, which underpins public finance ethics.
Businesses must balance operational convenience (e.g. sending goods on approval) with statutory obligations to avoid penalties, interest, or denial of ITC to counterparts.
Erroneous or delayed invoices disrupt supply-chain credits, raising working-capital costs for every downstream player.

Continuous Supply → Statement driven → Invoice at/before statement.
Approval Basis → Delivery challan first → Invoice on acceptance or 6 months.
RCM → Recipient liable → Self-invoice where supplier unregistered; otherwise normal invoice + RCM payment.