GST liability on advance received from customer
This query is : Resolved
10 June 2017
If the Company receives the advance from their customer on behalf of supply of goods in next month, so in this case who is liable to pay GST means either advance giver or receiver? and in case of receiver, how will adjust the same in invoice at the time of supply because no adjustment prescribed in invoice format
10 June 2017
Advance receiver needs to pay the GST by raising advance receipt voucher, he needs to declare the same in GSTR1 by 10 of subsequent month & needs to discharge the tax on advance receipt. but the service receiver is not allowed to take the credit till the completion of supply or till the supplier raises his final invoice.
10 June 2017
GST will also pay on advance receipt by receiver . Subsequently, raise invoice then charge GST on balance amt. ( sale value - advance receipt )
10 June 2017
ok but how to reduce advance receipt in invoice because no format is prescribed in invoicing format.
26 July 2024
When a company receives an advance payment from a customer for the supply of goods or services under GST, several key points need to be addressed regarding GST liability and how to handle the advance in invoicing. Here’s a detailed explanation:
### **1. GST Liability on Advance Receipt**
**a. **Who is Liable to Pay GST on Advance?**
- **Receiver of Advance (Supplier):**
- Under GST, the supplier who receives the advance is liable to pay GST on that advance. The GST should be paid at the time of receipt of the advance, not when the final supply is made.
**b. **GST on Advance Payment:**
- **Advance Received:** When you receive an advance from your customer, you need to issue a receipt voucher and pay GST on the advance amount.
- **Example:**
- **Advance Received:** ₹10K
- **GST Rate:** 18%
- **GST on Advance:** ₹1,800
- **Total Amount:** ₹11,800 (₹10K + ₹1,800 GST)
### **2. Adjusting Advance in Final Invoice**
**a. **Issuing Receipt Voucher:**
- **Receipt Voucher:**
- At the time of receiving the advance, issue a receipt voucher to the customer. This voucher should mention the amount of advance received and the GST charged.
- **Example Receipt Voucher:**
- **Advance Amount:** ₹10K
- **GST @ 18%:** ₹1,800
- **Total Receipt Amount:** ₹11,800
**b. **Adjusting Advance in Final Invoice:**
When issuing the final invoice, you need to adjust the advance received and reflect it correctly:
1. **Issue the Invoice for the Final Supply:**
- **Include the Total Value of Goods or Services Provided:**
- **Example:** Let’s assume the total invoice amount for the supply is ₹50K
- **Adjust the Advance Received:**
- **Advance Already Received:** ₹10K
- **Total Invoice Amount:** ₹50K
- **Outstanding Amount:** ₹50K - ₹10K = ₹40K
2. **Detail in the Final Invoice:**
- The final invoice should clearly show the advance received and the outstanding amount.
- **Example Invoice:**
- **Total Value of Goods/Services:** ₹50K
- **Less: Advance Received:** ₹10K
- **Net Amount Payable:** ₹40K
- **GST on Final Invoice (18%):** ₹40K × 18% = ₹7,200
- **Total Invoice Amount (Net Payable + GST):** ₹40K + ₹7,200 = ₹47,200
**c. **Invoicing Format:**
Even though the GST invoice format is not explicitly detailed for adjusting advance receipts, the key is to provide clear information:
- **Invoice Heading:**
- Clearly state the advance received.
- **Line Items:**
- Show the total value of the supply.
- Deduct the advance received.
- **Total Payable:**
- Display the outstanding amount and GST on the final invoice.
### **3. Reporting and Compliance**
**a. **GSTR-1 Reporting:**
- **Advance Received:** Report the advance in GSTR-1 in the table for advances received.
- **Final Invoice:** Report the final invoice including the adjustment of the advance.
**b. **GSTR-3B Reporting:**
- **Advance GST:** Report the GST paid on the advance in GSTR-3B.
- **Final Invoice GST:** Report the GST on the final supply, adjusting for the advance already accounted for.
### **Summary**
- **GST Liability on Advance:** The supplier (receiver of the advance) is liable to pay GST at the time of receiving the advance.
- **Adjusting Advance in Final Invoice:** Issue a receipt voucher for the advance and adjust it in the final invoice, showing the total value of the supply, advance received, and the net amount payable.
- **Reporting:** Ensure proper reporting in GSTR-1 and GSTR-3B, reflecting both the advance received and the final invoice.
For specific concerns or unusual scenarios, consulting with a GST professional or tax advisor is advisable.
### **1. GST Liability on Advance Receipt**
**a. **Who is Liable to Pay GST on Advance?**
- **Receiver of Advance (Supplier):**
- Under GST, the supplier who receives the advance is liable to pay GST on that advance. The GST should be paid at the time of receipt of the advance, not when the final supply is made.
**b. **GST on Advance Payment:**
- **Advance Received:** When you receive an advance from your customer, you need to issue a receipt voucher and pay GST on the advance amount.
- **Example:**
- **Advance Received:** ₹10K
- **GST Rate:** 18%
- **GST on Advance:** ₹1,800
- **Total Amount:** ₹11,800 (₹10K + ₹1,800 GST)
### **2. Adjusting Advance in Final Invoice**
**a. **Issuing Receipt Voucher:**
- **Receipt Voucher:**
- At the time of receiving the advance, issue a receipt voucher to the customer. This voucher should mention the amount of advance received and the GST charged.
- **Example Receipt Voucher:**
- **Advance Amount:** ₹10K
- **GST @ 18%:** ₹1,800
- **Total Receipt Amount:** ₹11,800
**b. **Adjusting Advance in Final Invoice:**
When issuing the final invoice, you need to adjust the advance received and reflect it correctly:
1. **Issue the Invoice for the Final Supply:**
- **Include the Total Value of Goods or Services Provided:**
- **Example:** Let’s assume the total invoice amount for the supply is ₹50K
- **Adjust the Advance Received:**
- **Advance Already Received:** ₹10K
- **Total Invoice Amount:** ₹50K
- **Outstanding Amount:** ₹50K - ₹10K = ₹40K
2. **Detail in the Final Invoice:**
- The final invoice should clearly show the advance received and the outstanding amount.
- **Example Invoice:**
- **Total Value of Goods/Services:** ₹50K
- **Less: Advance Received:** ₹10K
- **Net Amount Payable:** ₹40K
- **GST on Final Invoice (18%):** ₹40K × 18% = ₹7,200
- **Total Invoice Amount (Net Payable + GST):** ₹40K + ₹7,200 = ₹47,200
**c. **Invoicing Format:**
Even though the GST invoice format is not explicitly detailed for adjusting advance receipts, the key is to provide clear information:
- **Invoice Heading:**
- Clearly state the advance received.
- **Line Items:**
- Show the total value of the supply.
- Deduct the advance received.
- **Total Payable:**
- Display the outstanding amount and GST on the final invoice.
### **3. Reporting and Compliance**
**a. **GSTR-1 Reporting:**
- **Advance Received:** Report the advance in GSTR-1 in the table for advances received.
- **Final Invoice:** Report the final invoice including the adjustment of the advance.
**b. **GSTR-3B Reporting:**
- **Advance GST:** Report the GST paid on the advance in GSTR-3B.
- **Final Invoice GST:** Report the GST on the final supply, adjusting for the advance already accounted for.
### **Summary**
- **GST Liability on Advance:** The supplier (receiver of the advance) is liable to pay GST at the time of receiving the advance.
- **Adjusting Advance in Final Invoice:** Issue a receipt voucher for the advance and adjust it in the final invoice, showing the total value of the supply, advance received, and the net amount payable.
- **Reporting:** Ensure proper reporting in GSTR-1 and GSTR-3B, reflecting both the advance received and the final invoice.
For specific concerns or unusual scenarios, consulting with a GST professional or tax advisor is advisable.
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