What does “advance” mean under GST?
An advance means money received before supplying any goods or services.
Is GST applicable when I receive an advance from a customer?
Yes, but it depends on whether the advance is for goods or services.
Is GST charged on advance for goods?
No, GST is not charged on advance received for goods
When is GST applied on goods if not on advance?
GST is paid when the goods are actually supplied, as per the time of supply rules.
What is the “time of supply” for goods?
It is the earlier of the:
- Date of invoice
- Date of payment
Can you give an example of how time of supply works for goods?
Sure. If you received 50% advance on 15th May, and supplied goods on 1st June, but issued the invoice on 25th June, GST will be due on 25th June.
Do I need to pay GST if I receive an advance for services?
Yes, GST is applicable on advances for services.
What is the “time of supply” for services?
The earliest of:
- Date of invoice (if issued in time)
- Date of service (if invoice delayed)
- Date of receiving advance
- Date buyer records service in their books
So, if I receive advance for services before invoice, do I pay GST on that?
Yes. You must pay GST on the date you receive the advance.
Can you give an example of GST on service advances?
Sure. If you received ₹50,000 as advance on 20th Sept and the invoice was raised on 20th Oct, GST is due on 20th Sept for ₹50,000.
What documents should I issue when I receive an advance?
You must issue a receipt voucher to the customer.
What is a receipt voucher?
It’s a document acknowledging the receipt of advance, showing GST amount, description of goods/services, and applicable tax rate.
Is the GST calculated on advance inclusive or exclusive?
It is inclusive. You need to calculate the GST out of the amount received.
What if I don’t know the tax rate at the time of receiving the advance?
Then you should charge GST at 18%.
What if I don’t know the place of supply?
Treat the transaction as interstate and charge IGST.
Can you explain using an example of a service advance?
Yes. Say, you receive ₹4,00,000 advance on 10th Jan for a service worth ₹10,00,000. GST @ 18% must be paid on ₹4,00,000 in January.
When will GST be paid on the balance ₹7,80,000?
On the actual date of service and invoice, say 20th Feb.
Can I, as a customer, claim ITC on advance paid?
No. You can claim Input Tax Credit (ITC) only after receiving the service or goods.
Why can’t I claim ITC on advance?
Because one of the ITC conditions under GST is that goods/services must be received.
In the above example, when can the customer claim ITC?
Only after 20th Feb, when the service is completed.
What if the contract was for supplying goods instead of services?
Then no GST on the advance, and the entire tax is payable on invoice date (20th Feb in the example).
Where should I report advances received in GST return?
You need to report advances in Table 11A of GSTR-1.
What is Table 11A used for?
It captures all advances received for which invoices have not yet been issued.
Do I have to mention each advance separately?
No. You can report a cumulative total of all advances received in the month.
Where do I report adjustments of these advances when I issue invoices later?
In Table 11B of GSTR-1, where you adjust previous advances against current invoices.
Should I separate interstate and intrastate advances in GSTR-1?
Yes. Segregate them while reporting.
Do I need to show tax-wise breakup in GSTR-1?
Yes. Show CGST & SGST for intrastate and IGST for interstate advances.
Does GST on advance increase my monthly tax liability?
Yes. The GST collected on advance is added to your total tax payable for the month.
Is advance taxed twice — once on receipt and again on invoice?
No. You pay GST only once — either on receipt (for services) or on invoice (for goods).
What if the deal gets cancelled after receiving an advance?
You must issue a refund voucher, and reverse the GST liability.
Can I adjust GST paid on cancelled advance in future returns?
Yes, through adjustment entries in GSTR-1 and GSTR-3B.
What happens if I forget to pay GST on advance for services?
You may be liable for interest and penalty for delayed tax payment.
Can unregistered persons receive or give advances?
Yes, but GST rules still apply if the supplier is registered.
Is advance received in cash also taxable under GST?
Yes. Mode of receipt doesn’t matter.
Do I need to pay GST even if I don’t issue a tax invoice yet?
Yes, especially for services. GST is linked to time of supply, not just invoice.
What happens if I issue invoice late for a service advance?
Time of supply is still based on earlier of advance or invoice, so tax will apply from advance date.
Do composition dealers have to pay GST on advance?
Yes, if they receive advances for services, they are liable to pay tax.
Do I show advance in books as income?
No, advance is a liability until supply is made.
Do I have to show advance in my GSTR-3B?
Yes, include it in your outward taxable supplies.
Do I need to revise GSTR-1 if I wrongly reported an advance?
Yes, revise it in the subsequent month’s return by making corrections.
Can I issue a combined receipt voucher and tax invoice?
No. They are two separate documents.
What if I receive full payment before supply?
Same rules — pay GST as per time of supply provisions.
Is there a due date to issue receipt voucher?
There’s no specific deadline, but it must be issued immediately on receipt of advance.
Is GST applicable on security deposit?
No, unless it is adjusted as part of consideration later.
Can I avoid paying GST on advance by delaying the receipt?
You must follow accounting practices honestly. Artificial delays may attract scrutiny.
What if I receive part-payment — is it treated as advance?
Yes, the part received before supply is considered an advance.
Can I take ITC on inputs if I paid GST on advance?
Yes, if you're a supplier and paid GST, you can claim ITC on inputs used.
What rate of GST do I use if the goods or services are exempt?
No GST is applicable on exempt goods/services even if advance is received.
What if the rate changes between advance and supply?
Tax must be paid on advance at the rate prevailing on date of advance.
Is GST applicable on token amounts for bookings?
Yes, if it’s an advance for a future supply, it’s taxable.