Applicability of GST on advances received for future supplies

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1) Time of supply:
Time of supply is earliest of following:

a) At the time of receipt or payment; or
b) At the time of issue of invoice

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

Example:
An advance of Rs. 10 lacs is received 45 for a supply worth Rs. 1 crore to be made in future. The time of supply to the extent of advance received i.e. Rs.10 lacs shall be at the time of receipt of advance and for the balance amount of Rs. 90 lacs, it shall be determined with reference to date of issue of invoice and other parameters.

2) Taxability of Advance payment on the basis of GST registration is as under:
# Registration under GST act

(a) Composition Scheme
(b) Non composition/Regular Scheme

# Taxability under Regular Scheme:
Whether supply is of :
(a) Goods
(i) exempted from paying GST on Advances received under Notification no. 66/2017 dated 15.11.2017
(b) Services
(ii) GST is to be paid at the time of receipt of advances

Nature of Supply and Tax rate (RULE 50):

(a) Nature of Supply is not Determinable
(i) It should be treated as inter state supply & GST should be paid accordingly.
(ii)Tax rate should be taken as 18%.

Compliances under GST:
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 authorized representative.

Situations wherein after receiving Advance payment the supply is subsequently not made and the amount of such advance is to be refunded back:

If Tax invoice is:

(a) Issued :
(i) Credit note should be issued to square off transaction (Sect 34 read with rule 54)
(b) Not issued
(ii)Advance taken can be refunded & a refund voucher needs to be created

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, registered, 49 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 & 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 authorized representative.

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: Consolidated Statement of Advances Received/Advance adjusted in the current tax period/ Amendments of information furnished in earlier tax period: Rate wise and intra/interstate wise
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. 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.

GST on advance received by Composition dealer:

A Composition dealer is governed by Section 10 of the Act. 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.