GST on advances received for future supplies
GST Law and Procedure – GST Law and Procedure [January, 2019]
GST
Chapter Six
\nGST on advances received for future supplies
\nTime of supply determines when the taxpayer is required to discharge tax on particular supply. Time of supply provisions are governed by Section 12 to 14 of the CGST Act, 2017. As per the said provisions, the time of supply is determined with reference to the time when the supplier receives payment with respect to the supply as well as a few other references like issue of invoice, receipt of goods etc.
\nIn 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. Accordingly, GST needs to be paid with reference to the time at which advance is received, if any, and this requires compliances with a few procedu<\/p>\n
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Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n overnment has come out with Notification no. 66\/2017 dated 15.11.2017, whereby all suppliers of goods who have not opted for composition scheme, have been exempted from the burden of paying GST on Advances received. For such categories of taxpayers, time of supply would arise only at the time of issue of invoice and they need to discharge GST liability accordingly. But the supplier of services are required to pay GST at the time of receipt of advances. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n ST is to be paid at the time of receipt of advances. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n where at the time of receipt of advance, if the rate of tax is not determinable, the tax shall be paid at the rate of 18% and if the nature of supply is not determinable, the same shall be treated as inter-State supply and GST should be paid accordingly. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n ds or services in respect of which refund is made; (g) amount of refund made; = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n tax payable by him, an amount calculated at such rate as may be prescribed, but not exceeding, = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n . = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n","protected":false},"excerpt":{"rendered":" GST on advances received for future suppliesGST Law and Procedure – GST Law and Procedure [January, 2019]GSTChapter Six GST on advances received for future supplies Time of supply determines when the taxpayer is required to discharge tax on particular supply. Time of supply provisions are governed by Section 12 to 14 of the CGST Act, … Continue reading “GST on advances received for future supplies”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-16295","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/posts\/16295","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=16295"}],"version-history":[{"count":0,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/posts\/16295\/revisions"}],"wp:attachment":[{"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=16295"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=16295"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=16295"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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\nMany of the goods which were in the highest tax bracket of 28% have been brought down to the 5\/12\/18% bracket after the decision of the GST Council in its meeting held on 10.11.2017. Notification no. 41\/2017-Central Tax (Rate) dated 14.11.2017 has also been issued giving effect to the revised rates. It may so happen that advances were given when the rate was 28% and the supplier has paid tax on it. Subsequently the rate has been reduced to say 18%. Now, assuming supply happened after the change in tax rate and the invoice for the same w<\/p>\n
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\nNature of Supply and Tax rate (RULE 50):
\n Nature of Supply is not Determinable
\n (i) It should be treated as inter state supply & GST should be paid accordingly.
\n (ii)Tax rate should be taken as 18%.
\nCompliances under GST:
\nAs 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;
\nThe receipt voucher shall contain the particulars as contained in Rule 50 of the CGST Rules, 2017 which are as follows:
\na) name, address and Goods and Services Tax Identification Number of the supplier;
\nb) a consecutive serial number not exceeding sixteen characters, in one or multiple series, containing alphabets or numerals or special characters hyphen or <\/p>\n
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\nOnce 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. There could be multiple situations. One is that no tax invoice is issued till then. In that case, the advance taken can be refunded and a refund voucher need to be issued in such cases. However, 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.
\nAs per Section 31 (3) (e) ibid, where, on receipt of advance payment with respect to any supply of good<\/p>\n
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\ng) rate of tax (central tax, State tax, integrated tax, Union territory tax or cess);
\nh) amount of tax paid in respect of such goods or services (central tax, State tax, integrated tax, Union territory tax or cess);
\ni) whether the tax is payable on reverse charge basis; and
\nj) signature or digital signature of the supplier or his authorised representative.
\nAs 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.
\nTable 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
\nTable 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 1<\/p>\n
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\n(a) one per cent of the turnover in State or turnover in Union territory in case of a manufacturer or trader,
\n(b) two and a half per cent of the turnover in State or turnover in Union territory in case of persons engaged in making supplies referred to in clause (b) of paragraph 6 of Schedule II, and subject to such conditions and restrictions as may be prescribed.
\nThe provisions of Section 10 are subject to Section 9(3) & (4) which would mean that the composition dealer will have make necessary compliances on account of reverse charge supplies (apart from payment of tax u\/s 10 at the prescribed rate on his outward supplies). It may, however, be noted that provisions of Section 9(4) of the Act ibid has been suspended till 31.03.2018 vide Notification no.38\/2017-Central Tax (Rate) dated 13.10.2017. Section 10 of the Act ibid also suggests that a composition dealer has to pay, in lieu of tax<\/p>\n
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\nA combined reading of the above provisions would indicate that a 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.
\nObligation of taxpayer when an advance is received?
\n * Issue a Receipt voucher to the person paying advance. The receipt voucher will contain details like amount of advance, the rate of tax applicable, description of goods or services, etc.
\n *
\n\tCalculate Tax on Advance received and pay tax while filing the return for the month. The advance received should be grossed up. This means that advance received is considered inclusive of GST – When the rate of tax cannot be determined during receipt of advance GST @ 18% has to be charged – Also if the point of sale <\/p>\n
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