Advances under gst

https://simplesaravanan.blogspot.in/2017/06/advances-under-gst-explained-with.H T M L

Section 12(2)(b) provides for payment  of GST on advances for goods.  Section 13(2)(a) provides for payment of GST on advances for services

Example 1

1. Manufacturer enters into a contract with a distributor for a period of one year from  1.8.17 to 31.7.18
2. Distributor places an order for goods for Rs.15 lacs on 1.8.17
3. Distributor pays advance of Rs.7 lacs on 13.8.17
4. Distributor pays refundable deposit of Rs.10 lacs on 20.8.17 to be refunded after end of contract period
5. Manufacturer supplies the goods worth Rs.15 lacs on 18.11.17 and adjusts the advance of Rs.7 lacs in the invoice

Impact under GST

• No action for points 1 & 2 under GST
• For point number 3.  When distributor pays Rs.7 lacs advance on 13.8.17 the manufacturer should as per section 31(3)(d) should raise an advance receipt voucher for this advance payment receipt showing the below details
  • Name, address &  GST of manufacturer
  • Receipt should be consequently numbered
  • Date of issue
  • Name, address & GST of distributor
  • Descripttion of goods
  • Amount of advance taken
  • Rate of tax
  • Amount of tax
  • Place of supply with state code
  • Is it regular tax or paid on reverse charge
• This advance receipt voucher should be shown in the return which is to be filled before 10.09.17 and appropriate GST paid on or before 20.09.17
• As there is no supply of goods the GST paid on the advance voucher is not allowable as credit to distributor for the month of September
• For point number 4 – this is not an advance but a refundable deposit made by distributor, on this there is no GST liability  payable by the manufacturer
• Point number 5 – on 18.11.17 manufacturer will prepare an  invoice showing value of Rs.15 lacs and from that value show a deduction of Rs.7 lacs as advance and pay appropriate GST on the balance Rs.8 lacs.  Caution: Invoice should show value as Rs..15 lacs, less advance of Rs.7 lacs and balance Rs.8 lacs.  This invoice which contains the full details of goods value, advance & GST will be document for distributor to avail credit for the full value of Rs.15 lacs.

Example 2

1. Manufacturer enters into a contract with a distributor for a period of one year from  1.8.17 to 31.7.18
2. Distributor places an order for goods for Rs.60 lacs on 1.8.17
3. Distributor pays advance of Rs.12 lacs on 13.8.17 to be adjusted equally in all invoices to be raised
4. Manufacturer supplies goods worth Rs.5 lacs per month at end of every month and adjusts Rs.1 lacs of advance every month.

Impact under GST

• No action for points 1 & 2 under GST
• For point number 3.  When distributor pays Rs.12 lacs advance on 13.8.17 the manufacturer should as per section 31(3)(d) should raise an advance receipt voucher for this advance payment receipt showing the below details
  • Name, address &  GST of manufacturer
  • Receipt should be consequently numbered
  • Date of issue
  • Name, address & GST of distributor
  • Descripttion of goods
  • Amount of advance taken
  • Rate of tax
  • Amount of tax
  • Place of supply with state code
  • Is it regular tax or paid on reverse charge
• This advance receipt voucher should be shown in the return which is to be filled before 10.09.17 and appropriate GST paid on or before 20.09.17
• As there is no supply of goods the GST paid on the advance voucher is not allowable as credit to distributor for the month of September
• Point number 4 – every month manufacturer will prepare an  invoice showing value of Rs.5 lacs and from that value show a deduction of Rs.1 lacs as advance and pay appropriate GST on the balance Rs.4 lacs.   Distributor can avail of GST credit on this Rs.5 lacs and can claim the balance credit on advances only as and when invoices are raised by manufacturer.

   

Difficulties under advance

• If GST rate for the goods or services are not known or fixed at the time of payment of advance then GST should be charged @ 18% on the advance
• If at the time of paying advance it is difficult to ascertain it is an Interstate or Intrastate sale then it should be considered as Interstate sales.