Know All About GST on Advance Payment

what do u mean by Advance payment under Gst, What document is to be issued by the supplier, What will be Taxable Amount for Gst, How Advance Tax will be calculated

GST on Advance Payment.

Meaning of Advance Payment:-

Advance payment is receipt of money in advance before completing supply process that is made ahead of its normal schedules, such as paying for the goods or service before you actually receive the goods or service

Advance payment under GST:-

For the purpose of determining Taxability under GST for the advance payment, first, we have to determine the Time Of Supply. The rule for determining it is as given below:-

The Basic rule for the time of supply for services is the earliest of the following –

  1. Date of issue of the invoice.
  2. Date of receipt of payment/advance*
  3. The date on which invoice should be issued.

In other words, this means that if the advance is received before the issue of the invoice the time of supply would be the date of receipt of advance

No Taxability of  GST on Advance For Supply Of Goods

In the earlier provision of GST, GST on Supply of Goods required to be paid at the time of receipt of advance. But these provisions were creating complexity, so to make the process simplified relief for the industry, the GST Council dropped an earlier requirement of payments of Goods and Services Tax (GST) on advances received for supply of goods.

Responsibility of Taxpayer:-

  • Issue a Receipt Voucher:

It is the Responsibility of the Taxpayer (The supplier) to issue a receipt voucher to the person paying advance. The receipt voucher will contain various details like the amount of advance, the rate of tax applicable, description of goods or services, etc.

  • Calculate Tax on Advance Received:-

GST liability has to be calculated in regard to advance and pay accordingly while filing the return for the month.

The advance received should be grossed up as advance received would be considered as the inclusive of GST.

It is to be noted, When the rate of tax cannot be determined during receipt of advance GST @ 18% has to be charged.

Also if the point of sale cannot be ascertained the advance is considered as interstate supply and IGST has to be paid.

gst registration

  • Incorporate advance received in GSTR 1

Details of advances received to be declared in GSTR-1 in consolidated form as per monthly return filing forms.

Although there is no need to segregate of Advances received in terms of Intra and Inter supply still Advances should be firstly segregated into Interstate and intrastate advances.

The total amount of money received as of advances should be mentioned under Gross Advance Received/ Adjusted.

After this, the tax payable i.e. CGST and SGST in case of intrastate and IGST in case of interstate advances should be stated.

This Gst tax payable amount on advance would be added to the total amount of tax liability of the supplier.

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