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GST on Advances Received for Services

Time of supply provisions are governed by Section 12 to 14 of the CGST Act, 2017. In general, the time of supply is earliest of issuance of invoice or receipt of payment. Therefore, in case of advance received for any supply, time of supply is fixed at the point when advance is received, irrespective of the fact whether the supply is made or not.

As per Notification no. 66/2017 dated 15.11.2017, all suppliers of goods who have not opted for composition scheme, have been exempted from the burden of paying GST on Advances received. But the suppliers of services are required to pay GST at the time of receipt of advances.

Relevant Section: Section 12 to 14 of CGST Act 2017
Relevant Section: Section 31(3) of CGST Act 2017
Relevant Notification: Notification No. 66/2017 – Central Tax dated 15/11/2017
Relevant Rule: Rule 50 of the CGST Rules 2017
Relevant Rule: Rule 56(3) of the CGST Rules 2017

Compliances under GST

a) on receipt of advance payment

As per Section 31 (3) (d) of the CGST Act, 2017, a registered person shall, on receipt of advance payment with respect to any supply of goods or services or both, issue a receipt voucher or any other document, containing such particulars as may be prescribed, evidencing receipt of such payment.

The receipt voucher shall contain the particulars as contained in Rule 50 of the CGST Rules, 2017 which are as follows:

(a) name, address and Goods and Services Tax Identification Number of the supplier;
(b) 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;
(c) date of its issue;
(d) name, address and Goods and Services Tax Identification Number or Unique Identity Number, if registered, of the recipient;
(e) description of goods or services;
(f) amount of advance taken;
(g) rate of tax (central tax, State tax, integrated tax, Union territory tax or cess);
(h) amount of tax charged in respect of taxable goods or services (central tax, State tax, integrated tax, Union territory tax or cess);
(i) 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;
(j) whether the tax is payable on reverse charge basis; and
(k) signature or digital signature of the supplier or his authorised representative: Provided that where at the time of receipt of advance,-
(i) the rate of tax is not determinable, the tax shall be paid at the rate of eighteen per cent.;
(ii) the nature of supply is not determinable, the same shall be treated as inter-State supply.

📝Note: If the rate of tax or place of supply is not determinable at the time of receiving advance payment, IGST should be paid at 18% rate as per the proviso to Rule 50.

b) in case of refund of advance received

Once an advance payment has been made and a receipt voucher has also been issued, there may be situations wherein the supply is subsequently not made and the amount of advance is to be refunded back. Now there are two cases:

Case I: no tax invoice is issued – In that case, the advance taken can be refunded and a refund voucher need to be issued. The refund voucher shall be as per Rule 51 of the Rules ibid and shall contain following particulars:

a) name, address and Goods and Services Tax Identification Number of the supplier;
b) 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;
c) date of its issue;
d) name, address and Goods and Services Tax Identification Number or Unique Identity Number, if registered, of the recipient;
e) number and date of receipt voucher issued in accordance with the provisions of rule 50;
f ) description of goods or services in respect of which refund is made; (g) amount of refund made;
g) rate of tax (central tax, State tax, integrated tax, Union territory tax or cess);
h) amount of tax paid in respect of such goods or services (central tax, State tax, integrated tax, Union territory tax or cess);
i) whether the tax is payable on reverse charge basis; and
j) signature or digital signature of the supplier or his authorised representative.

Case II: if tax invoice has already been issued – credit note will have to be issued in order to square off the transaction. Credit Note can be issued in terms of the provisions contained in Section 34 of the Act ibid read with Rule 54 of the Rules ibid.

📝Note: As per Rule 56(3) of the Rules ibid, every registered person shall keep and maintain a separate account of advances received, paid and adjustments made thereto.

Table 11 of GSTR-1

Table 11A of FORM GSTR-1 captures information related to advances received, rate-wise, in the tax period and tax to be paid thereon along with the respective place of supply (POS). Table 11B captures adjustment of tax paid on advance received and reported in earlier tax periods against invoices issued in the current tax period.

📝Note: The 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. Whereas adjustments made in respect of advances received during the earlier tax period, but invoices issued in the current tax period would be reflected in Table 11B.

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