GST on Advance Payment – All You Need to Know

Usually, GST is required on a supplier of goods and services at the time of receipt of payment. In some cases, advance payment is made by the recipient of the goods or/and services or both to the supplier. So, in these articles, we will discuss all the applicability of GST on advance payments.

GST on Advance Payment

When a payment is made before of actual time is termed as advance payment. In GST sometimes making the payment for the goods or service before the reception of goods or services is said to be GST in advance System. Sometimes the supplier of goods and services also needs money in advance as a protection against non-payment or cover its costs for providing a product or rendering of a service.

For example, the rent of the hotel’s room is rupees 1800 for a single day. To confirm the booking of the room we make a payment of 1000  to the owner of the room. This upfront money is known as advance payment.

As we 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 reception of advances for Services.

Therefore, if the supplier demands advance money before providing the service, GST should be paid on the advance, even if the service has not yet been provided.

GST Advanced Receipt Voucher

The advance receipt voucher is required to contain the following details in order to fulfill the GST rules.

  • Name, address and GST identification number(GIN) of the supplier of the goods or/and service;
  • The advance receiving voucher must contain a sequential serial number not more than sixteen characters, containing alphabets or numerals or special characters;
  • Date of issue;
  • Name, address and GST Identification Number, if registered, of the receiver;
  • Details of the of goods or/and services;
  • Amount of advance received;
  • Amount of tax charged in regard to taxable goods or services;
  • Place of supply with the name of State and its code
  • Whether the GST is payable under the reverse charge basis; and
  • Signature/digital signature of the supplier or authorized representative.\

Treatment of Advance Received In GST Return

The detail of advance received money is specified in S.R. No. 11A of the GSTR – 1 return. It explains the advance payment received in the tax period for which the invoice has not been issued.

Additionally, it is noted that S.R. No. 11A of GSTR – 1 return value of the advance amount received must be separated into two parts i.e. advance money received against intra-state supply and advance money received against inter-state supply. Although the consolidated figures of advance money received are stated in the same, the details of each advance money received need not be mentioned.

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

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