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2019

GST ON ADVANCE RECEIPT

GST on Advance Tax

Under GST regime, if a registered dealer receives any sum of money as advance for any nature supply, such advance receipts will be liable to GST at applicable tax rates. Hence, the dealer must assume the amount of advance receipt as inclusive of GST and must discharge his tax liability on such advance receipts along with other tax liabilities for the relevant tax period in which advance amount is received. Continue reading the article for further details.

Time of supply:

Time of supply is earliest of following:

  • At the time of receipt or payment; OR
  • At the time of issue of invoice

Accordingly, GST needs to be paid with reference to the time at which advance is received:

Taxability of Advance Receipts:

  • Nature of Supply – Goods: Exempted from paying GST on Advances received under Notification no. 66/2017 dated 15.11.2017
  • Nature of Supply – Services: GST is to be paid at the time of receipt of advances

 

Applicable Tax rate on Advance Receipts:

  • When nature of Supply is Determinable: As per the applicable tax rate on supply.
  • When nature of Supply is not Determinable:
  1. It should be treated as inter state supply & GST should be paid accordingly.
  2. Tax rate should be taken as 18%.

 

Compliances under GST:

  • On receipt of advance payment with respect to any supply of goods or services or both, a registered person must issue a receipt voucher or any other document, containing details of receipt;
  • The receipt voucher shall contain following details:
  1. name, address and Goods and Services Tax Identification Number of the supplier;
  2. a consecutive serial number not exceeding sixteen characters, in one or multiple series, containing alphabets or numerals or special characters hyphen or dash and slash symbolized as “-” and “/” respectively, and any combination thereof, unique for a financial year;
  3. date of its issue;
  4. name, address and Goods and Services Tax Identification Number or Unique Identity Number, if registered, of the recipient;
  5. description of goods or services;
  6. amount of advance taken;
  7. rate of tax (central tax, State tax, integrated tax, Union territory tax or cess);
  8. amount of tax charged in respect of taxable goods or services (central tax, State tax, integrated tax, Union territory tax or cess);
  9. place of supply along with the name of State and its code, in case of a supply in the course of inter-State trade or commerce;
  10. whether the tax is payable on reverse charge basis; and
  11. Signature or digital signature of the supplier or his authorised representative.

 

Compliance for Non-supply of goods / services against advance receipts:

Some times, after receiving Advance payment the supply is not made for any reasons. In this case the amount of such advance is to be refunded back. Following points must be kept in mind in this regard:

  • Where Tax Invoice is issued: Credit note should be issued to square off transaction.
  • Where Tax Invoice is not issued: Advance taken can be refunded & a refund voucher needs to be created.

 

Details of Refund Voucher:

A Refund Voucher must contain following particulars:

  1. name, address and Goods and Services Tax Identification Number of the supplier;
  2. a consecutive serial number not exceeding sixteen characters, in one or multiple series, containing alphabets or numerals or special characters’ hyphen or dash and slash symbolized as “-” and “/” respectively, and any combination thereof, unique for a financial year;
  3. date of its issue;
  4. name, address and Goods and Services Tax Identification Number or Unique Identity Number, registered, 49 of the recipient;
  5. number and date of receipt voucher issued in accordance with the provisions of rule 50;
  6. description of goods or services in respect of which refund is made;
  7. amount of refund made & rate of tax (central tax, State tax, integrated tax, Union territory tax or cess);
  8. amount of tax paid in respect of such goods or services (central tax, State tax, integrated tax, Union territory tax or cess);
  9. whether the tax is payable on reverse charge basis; and
  10. signature or digital signature of the supplier or his authorised representative.


Advance Receipt Details in FORM GSTR-1:

Table 11A

Captures following information:

  • Amount of advances received;
  • Rate-Wise Bifurcation;
  • Relevant Tax Period;
  • Tax to be paid thereon;
  • Place of Supply (POS).

Note:  details of information relating to advances would be submitted in Table 11A only if the invoice has not been issued in the same tax period in which the advance was received

Table 11B   Adjustments made in respect of advances received during the earlier tax period, but invoices issued in the current tax period would be reflected in this table.

 

GST on advance received by Composition dealer:

Composition dealer will not have to pay any tax on advances received, if such advances pertain to his outward supplies. The advances received and goods returned do not form part of taxable supplies and do not form part of the turnover in a state at the end of the quarter (tax period) for the purpose of computing turnover in a state.

 

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