GST on Advance Payment

Generally, GST is imposed on a supplier of goods and service at the time of receipt of payment. However, in some cases, an advance payment is first made by the recipient of the goods or/and service or both to the supplier. In this article, we will discuss the applicability of GST on advance payments.

GST on Advance Payment

When a payment is made ahead of its actual schedule such payment is termed as advance payment, such as making the payment for the goods or service before the receipt of goods or service. In addition to this, sometimes the supplier of the goods and service requires an advance payment as a safeguard against non-payment, or to cover its costs for supplying a product or rendering of a service.

For example, the rent of a banquet hall is Rupees 1,00,000 for a single day accommodation. To ensure that the booking gets confirm we have to make an upfront payment of Rupees 15,000 to the owner. This upfront payment is called an advance payment.

As mentioned above, GST is to be paid at the time of delivery of the goods or completion of services. However, an exception to this rule is the receipt of advances. Therefore, If a supplier demands an advance payment before delivering/rendering the goods or services as the case may be, GST has to be paid on the advance amount even if the goods have not been delivered or service has not yet been rendered.

GST Advance Receipt Voucher

The advance receipt voucher is required to contain the following details in order to comply with the GST rules:

• Name, address and GST Identification number of the supplier of the goods or/and service;
• The advance receipt voucher must contain a consecutive serial number not exceeding sixteen characters, containing alphabets or numerals or special characters;
• Date of issue;
• Name, address and GST Identification Number, if registered, of the recipient;
• Details of the of goods or services;
• Amount of advance received;
• The rate of tax;
• Amount of tax charged in regard to taxable goods or services;
• Place of supply along with the name of State and its code
• Whether the GST is payable under the reverse charge basis; and
• Signature or digital signature of the supplier or his authorised representative.

Treatment of Advance Received In GST Return

Details of the amount received as the advance are required to be mentioned in sr. no. 11A of the GSTR – 1 return. As it shows the figure of the advance money received in the tax period for which invoice has not been issued.

Additionally, it is important to note that in sr. no. 11A of the GSTR – 1 return figures of the advance money received must be bifurcated in two parts i.e. advance money received against intra-state supplies and advance money received against inter-state supplies. However, consolidated figures of the advance money received are to be stated in the same, details of each advance money received need not to be mentioned.

The gross amount of advance money received is required to be mentioned under the head ‘Gross Advance Received / Adjusted’ and matching tax liability is required to be reflected under ‘Central’ and ‘State/ UT’ head in case of intra-state supplies and under ‘integrated’ head in case of inter-state supplies.

Courtesy: CA Sandeep Kanoi in TaxGuru